Short of ISA ideas? This week as part of our Guide to ISA Investing we reveal the top rated and top performing stock and fund ideas – as well as sharing where the experts stash their cash, the latest news from the 2017 Budget Report and how to reduce your tax bill.
Political risk has created considerable uncertainty for investors over the past 18 months, thanks to the Brexit vote to leave the European Union and the victory of Donald Trump in the US Presidential race. However, these events may only be just the beginning as Europe faces three major elections in 2017, and the unrolling of potentially unsettling Trump policies.
How to Smooth Volatility
Against that backdrop it is difficult for investors to time the market. Investors therefore might like to consider regular investing, said Dan Kemp, chief investment officer of Morningstar Investment Management. Investors can use drip feeding to reduce the risk missing out on buying on the inevitable dips in asset prices. “Drip feeding” is investing a small amount of money on a regular basis – usually from £50 a month.
Investors can also mitigate politically driven risks by geographically diversifying their portfolios by investing in global funds. Using the Morningstar.co.uk Fund Screener, we looked for the three top rated funds offering geographical diversification.
3 Gold Rated Global Equity Funds
Dodge & Cox Worldwide Global Stock is a Gold Rated fund that is amongst the cheapest in the global large-cap blend equity Morningstar Category. Investors who share the manager Charles Pohl’s patience and long-term investment horizon have been well served thus far, said Fatima Khizou, Morningstar fund analyst. Khizou said the manager applies a value-tilted approach and is not afraid to invest in out-of-favour stocks. The fund gained 39.8% in 2016, the best return since the fund launched in 2009.
While that's a relatively short track record to achieve the highest Morningstar Analyst Rating of Gold, a mirror global fund sold in the US has been running since 2008, a global ex-US fund was launched in 2001, and a US equity fund has been in existence for even longer, said Khizou. Analysts list these funds because in addition to their excellent records, there is considerable overlap between them in terms of the stocks and the named managers, who apply the same investment process across all Dodge & Cox strategies, Khizou added.
Veritas Global Focus is a Gold Rated fund that remains amongst the strongest offerings in its sector for investors seeking global equity exposure with the aim of growing the value of their investment through time, said Muna Abu-Habsa, Morningstar fund analyst. A major strength of this fund is its management. Charles Richardson and Andrew Headley, who previously worked together at Newton, have been at the helm since the fund was launched in 2003, said Abu-Habsa.
The fund’s standout characteristic is the extent to which the managers aim to deliver real returns to investors. The real-return focus has driven the fund to strong returns in a variety of market conditions, including years as disparate as 2009 with 22.2% returns, said Abu-Habsa. That is not to say, however, that the fund will outperform in all types of markets, Abu-Habsa added. For example, the fund gained 5% in 2012 which was less competitive compared to its peers as the managers’ penchant for cash-generative companies drove its large underweighting in financials, which then had an adverse impact on returns. The fund gained 25.5% in 2016.
Another Gold Rated fund is Murray International (MYI), a closed-end fund. This fund is an excellent option for investors seeking long-term capital growth and income from global equities, said David Holder, Morningstar senior fund analyst. Holder said this fund has a dual mandate: The aim of the company is to achieve a total return greater than its benchmark by investing predominantly in equities worldwide. Within this objective the fund manager Bruce Stout seeks to increase the company’s revenues in order to maintain an above-average dividend yield.
Whilst the long-term performance is strong over Stout’s tenure, returns have been much weaker from 2013 to 2015 which analysts cannot ignore, said Holder. The team won’t be tempted to change its investment criteria to chase short-term gains nor will it buy companies whose valuations it deems expensive. Therefore Holder confirms the investment process remains consistently applied and therefore analysts remain their conviction to this fund.
