Flexible bond funds, multi-asset income strategies and US equities are some of the areas where professional investors have been researching offshore funds.
While the Investment Association universe receives the bulk of investor attention, there are a great many funds with respected managers and strong track records that are not included in it but can still be bought by UK-based investors.
With this in mind, we used the FE Analytics Market Intel Tool to find out which funds in the FCA Recognised universe – which is home to non-Investment Association offshore funds – have been the most heavily researched by financial advisers, wealth managers and other professionals over the past year.
Schroder ISF Global Multi-Asset Income
First up is the $4bn Schroder ISF Global Multi-Asset Income fund, which has been managed by Aymeric Forest since its launch in April 2012. It is domiciled in Luxembourg and resides in the FO Mixed Asset – Cautious sector.
The fund has the aim of producing an income distribution of 5 per cent per annum while generating capital growth over the market cycle through a diversified portfolio. Since launch, the fund has made a 44.37 per cent total return, outperforming its average peer, and an initial investment of £10,000 would have yielded just over £4,750 in income payouts.
Performance of fund vs sector since launch
Source: FE Analytics
Forest is a member of Schroders’ global asset allocation committee and oversees the portfolio. However, its equities are selected by the respected Schroders QEP team and its bond holdings are chosen by in-house specialists for each sector; the selection of alternative investment is often outsourced.
At the moment, the portfolio has 28.8 per cent of assets in equities, with 16.7 per cent in US high yield bonds and 13.2 per cent in dollar-denominated emerging market debt. Its top 10 holdings account for just 5.2 per cent of the portfolio and includes government bonds, GCP Infrastructure Investments and Starwood European Real Estate Finance Limited.
Schroder ISF Global Multi-Asset Income has an ongoing charges figure (OCF) of 1 per cent and is yielding 3.46 per cent.
Franklin U.S. Opportunities
Next up is the $3.5bn Franklin U.S. Opportunities fund, which is run by Grant Bowers and Sara Araghi. The managers also have a fund in the Investment Association universe with a similar name, but the two vehicles are positioned differently.
Bowers, who has worked on the portfolio since 2007 (Araghi joined it in 2016), has more than 20 years’ investment experience and runs the fund with a growth approach that prioritises companies with sustainable earnings and quality balance sheets.
The Luxembourg-domiciled fund has outperformed its average peer in the FO Equity – USA sector over the past one, three, five and 10 years; over the past decade, its 237.80 per cent total return is much higher than that delivered by its average peer although it is behind its Russell 3000 Growth benchmark.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
Amazon.com, Apple, Visa, Mastercard and Microsoft are the portfolio’s five largest positions, reflecting overweights to the information technology and financials sectors. However, the fund has the flexibility to invest across the market cap spectrum and has exposure to the small- and mid-cap parts of the market.
Franklin U.S. Opportunities has a 1.83 per cent OCF.
Allianz US High Yield
The professional investors using FE Analytics have also been paying a lot of attention to Doug Forsyth’s $3.4bn Allianz US High Yield fund. This is another Luxembourg-domiciled offering and a member of the FO Fixed Interest – USD High Yield sector.
Forsyth is supported by a 15-member team specialising in US high yield bonds and uses a fundamental, bottom-up research process to identify high yield corporate issuers demonstrating improving fundamentals. The team also seeks to minimise credit risk through Allianz Global Investors’ global research platform and an objective, quantitative proprietary model that attempts to determine if a company’s high yield bond is likely to receive an upgrade.
Performance of fund vs sector and index since launch
Source: FE Analytics
Since launch in August 2010, the fund has made a 69.80 per cent total return and slightly underperformed its average peer.
In a recent update, Forsyth highlighted the attractiveness of high yield bonds in the current environment: “From an asset-class perspective, the relative value proposition of US high-yield bonds is clear. With US Treasuries and US investment-grade corporates yielding 2.9 per cent and 3.8 per cent, respectively at month-end, and trillions worth of debt globally yielding even less, the 6.4 per cent yield of the US high yield market is a compelling opportunity for both international and domestic investors alike.”
Allianz US High Yield has a 0.76 per cent OCF.
Templeton Global Total Return
The second most researched offshore fund is Templeton Global Total Return. Managed by Michael Hasenstab and Sonal Desai, the Luxembourg-domiciled fund is a popular one with assets of $19.9bn and strong outperformance of its average peer and benchmark over the past decade.
Templeton Global Total Return is a flexible bond fund that aims to maximise total returns through a combination of interest income, capital appreciation and currency gains. The fund is significantly underweight the US at the moment, with overweights to emerging markets such as Mexico, Brazil and India.
The managers said in a recent update: “Our philosophy is grounded in a focus on long-term fundamentals and patience. We believe that while markets can deviate from fundamentals in the shorter term, they tend to reflect them over the medium-to-long term.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
“Thus we seek to identify and exploit the imbalances we see in the market and position for the directional trends we see going forward, ahead of inflection points. Our oftentimes contrarian viewpoint also allows us to find potential investment opportunities particularly during periods of volatility and panic, where we can exploit market mispricing.”
Templeton Global Total Return has a 1.43 per cent OCF.
Fidelity America
The most researched offshore product on FE Analytics is Luxembourg-domiciled $5.8bn Fidelity America fund, which is managed by Angel Agudo and is a member of the FO Equity – USA sector.
Agudo also runs the onshore Fidelity American Special Situations fund and, as such, seeks out undervalued companies and those that have gone through a period of underperformance but he expects to recover.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
The fund has underperformed its average peer and the S&P 500 since the manager took over in May 2014, although it needs to be kept in mind that this is a relatively short time frame and a period when the value style has underperformed.
In terms of positioning, the portfolio is overweight financials and healthcare. Within financials, Agudo prefers the insurance and diversified financial services sectors with Willis Towers Watson and Berkshire Hathaway being key active positions; in healthcare, Abbott Laboratories is a preferred holding.
Fidelity America has a 1.88 per cent OCF.