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Five global funds that have stood the test of time

18 September 2018

We turn our attention to funds with global remits to see which have consistently been at the top of their peer groups.

By Gary Jackson,

Editor, FE Trustnet

Funds investing in global stocks and emerging market equities are some of the most popular options in the industry as they offer a good way to diversify UK-heavy portfolios.

However, both the IA Global and IA Global Emerging Markets sectors are mixed bags of funds with some generating handsome returns for investors while other have struggled to keep pace with the market.

In this study, we look at the funds in both sectors that have been around for 20 years or more. We then reviewed their returns over 61 rolling five-year periods spanning 30 June 1998 and 30 June 2018 and created a shortlist of those with an average decile ranking of 3.5 or lower.

Out of the 57 funds with a long-enough track record, only five made the cut. We look at these global and emerging market funds that appear to have stood the test of time in more detail below.

 

Aberdeen Emerging Markets Equity

Coming in top place is the team-managed Aberdeen Emerging Markets Equity fund, which has an average five-year decile score of 2.07. The fund has spent 44 of the 61 five-year periods we looked at in the top decile of the IA Global Emerging Markets sector.

Over the full 20 years spanning June 1998 to June 2018, the £1.2bn fund made a cumulative total return of 846.12 per cent – which is the highest in the peer group. It has dropped towards the bottom of the sector in more recent five-year periods, however.

Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

The process behind the £1.1bn fund focuses on quality, with the team (which is led by Aberdeen Standard Investments head of global emerging markets, equities Devan Kaloo) looking for stable business franchises with recurring earnings growth, balance sheet strength and having good company management in place.

Square Mile Investment Consulting & Research, which gives the fund an ‘A’ rating, said: “The team have a well­tested process which they have followed consistently in different macroeconomic and market conditions for many years.

“They can invest anywhere they see fit but they aim to buy quality companies with management teams they can trust to run their businesses ably and for the benefit of shareholders. This does narrow their investable universe of companies but we think this seems a reasonable strategy to have particularly in a region that can present a number of risks, such as poor corporate governance.”

Aberdeen Emerging Markets Equity has an ongoing charges figure (OCF) of 1.21 per cent and is yielding 1.00 per cent.


Invesco Perpetual Global Smaller Companies

In second place with an average decile ranking of 2.08 is Invesco Perpetual Global Smaller Companies, which is managed by chief investment officer Nick Mustoe and the Invesco Perpetual global smaller companies group.

The £828.2m fund made a 663.96 per cent total return over the full 20 years we reviewed in this research, with 19 of those rolling five-year periods seeing it in the top decile of the IA Global sector.

Performance of fund vs sector between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

The fund launched in September 1984 and has been headed up managers including Bob Yerbury (March 2007 to November 2010) and Kathryn Langridge (January 1990 to March 2007).

Mustoe and the smaller companies team have a bottom-up approach that has a focus on valuations. When building the portfolio, the skills of six regional specialists are drawn upon to capitalise on their areas of expertise.

Invesco Perpetual Global Smaller Companies has an OCF of 0.95 per cent.

 

SKAGEN Global

The £2.4bn SKAGEN Global fund is next after averaging a five-year decile rank of 3.39 for the two decades covered in this study. It was in the IA Global sector’s first decile in 35 of the 61 rolling five-year periods.

It has been managed by Chris-Tommy Simonsen since April 2006 with Knut Gezelius joining as co-manager in May 2014. The process behind the portfolio seeks out “low-priced, high-quality companies” with the aim of providing investors with the best possible risk-adjusted return.

FE Analytics shows that SKAGEN Global posted a 1,572.90 per cent total return for the 20 years spanning 30 June 1998 to 30 June 2018. This is the highest return in the IA Global sector over this period (the average fund made 198.01 per cent over this time) of the 44 funds with a long-enough track record.

However, the fund has been in the lower deciles over more recent time frames. Out of the 15 most recent rolling five-year periods (so going back to the start of 2010), it was bottom-decile in two of them and ninth-decile in the remaining 13.

The fund’s latest factsheet shows it is underweight the US, which is the dominant country in the benchmark, and overweight the UK, which is currently unloved by many global managers. It is also running overweights to financials and technology stocks.

SKAGEN Global has a 1 per cent OCF.


Baillie Gifford International

The four FE Crown-rated Baillie Gifford International fund is the fourth entry on the shortlist with an average five-year decile rank of 3.43. It also made a cumulative return of 443.38 per cent over the 20 years in question, putting it in seventh place in the IA Global sector.

The portfolio launched in July 1980 and is currently headed up by Charles Plowden, Malcolm MacColl and FE Alpha Manager Spencer Adair. It was also managed by Hamish Dingwall between December 2005 and March 2007; prior to this, Baillie Gifford & Co was the named manager.

Performance of fund vs sector and index between 30 Jun 1998 and 30 Jun 2018

 

Source: FE Analytics

Like other Baillie Gifford managers, Plowden, MacColl and Adair seek out companies that generate above-average earnings growth, focusing on those with competitive advantages and superior business models.

This quality growth approach has served the £1bn fund well, as FE Analytics shows it is in the peer group’s top decile over one, three, five and 10 years as well as the longer time frame reviewed in this research.

Baillie Gifford International has an OCF of 0.61 per cent.

 

Lazard Emerging Markets

The £1bn Lazard Emerging Markets fund is the final offering to make it onto our shortlist of consistently strong, longstanding funds. It has averaged a five-year decile rank of 3.48.

Over the full 20-year period we looked at, the fund posted a 513.49 per cent total return. This is the fourth highest gain in the IA Global Emerging Markets sector, even if the value style it follows has underperformed for much of the recent past.

James Donald has managed the portfolio since its launch in 1997. Donald joined Lazard in 1996 and is head of its emerging markets group; the fund management house describes him as being “instrumental” in establishing its capabilities in the asset class.

The FE Invest team, which has the fund on its Approved List, said: “The fund has consistently stuck to its long-term value-focused strategy even when this has caused it to underperform the market and peers.

“However, when the value style has been in favour it has done well against both. This is therefore a good option for investors who want to invest in cheap stocks in the belief they will appreciate more in the long term and those who understand this strategy can lead to underperformance in the short term.”

Lazard Emerging Markets has an OCF of 1.08 per cent and is yielding 2.10 per cent.

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