Market crashes are notoriously hard to forecast, but staying invested when times get tough is critical to long-term success. One strategy to cope with market volatility is to pick funds that can provide cushions during market blows.
Below are five global equity funds covered by Morningstar’s manager research team that have shown good resilience in the down markets of the last decade.
- Fidelity Funds - Global Dividend
- GQG Partners Global Equity
- GuardCap Global Equity
- Nordea 1 - Global Stable Equity
- Stewart Investors Worldwide Leaders Sustainability
Funds to Weather Market Volatility
Fidelity Funds - Global Dividend
- Morningstar Medalist Rating: Silver (on the I Acc EUR share class)
- Morningstar People Pillar Rating: Above Average
- Morningstar Process Pillar Rating: Above Average
- Morningstar Parent Pillar Rating: Above Average
- Morningstar Category: EAA Fund Global Equity Income
Analyst: Jeffrey Schumacher
Income-oriented funds tend to be good partners to withstand market crashes. Dividend paying stocks are often mature and profitable businesses with reliable cash flows. But not all dividend strategies are created equal and Fidelity Funds - Global Dividend distinguishes itself from the crowd thanks to its experienced and savvy stock-picker and a well-designed and consistently executed process. Dan Roberts has been managing the strategy since its inception in 2012. He brings more than 20 years of dividend experience to the fund. While he leverages the insights of Fidelity’s sector analysts and regional dividend team, Roberts drives most of the idea generation, company analysis, and execution, so there is an element of key-person risk.
The fund manager looks for companies with predictable and resilient cash flows, reliable business models, transparent financial statements, sound balance sheets, and strong management. While quality is important, Roberts carefully monitors valuations and will trim or sell positions that he believes are fairly valued.
The approach leads to a 40-60 stock portfolio where cyclical industries like banks, energy, and commodities are typically avoided. These sector biases combined with the emphasis on quality businesses has historically led to better downside resilience than peers. While keeping up in rising markets has been challenging at times, investors with long-term investment horizons can expect superior risk-adjusted returns.
GQG Partners Global Equity
- Morningstar Medalist Rating: Gold (on the I USD Acc share class)
- Morningstar People Pillar Rating: High
- Morningstar Process Pillar Rating: High
- Morningstar Parent Pillar Rating: Above Average
- Morningstar Category: EAA Fund Global Large-Cap Growth Equity
Analyst: Gregg Wolper
Lead manager Rajiv Jain focuses on quality-growth stocks but the strategy can make unorthodox moves and shift direction decisively, depending on market conditions.
He and his team focus on big companies with competitive advantages, solid financial footing and preferably demonstrate the ability to weather slow economies. This stock picking strategy has historically translated into good resilience in down markets, contributing to impressive long-term results. Still, decisive shifts of sector and bold moves into controversial stocks can easily backfire. But Jain has taken such steps before—though not as frequently as in recent years—and has proven his abilities over more than two decades to navigate down markets and generate long-term excess returns.
GuardCap Global Equity
- Morningstar Medalist Rating: Gold (on the I USD Acc)
- Morningstar People Pillar Rating: High
- Morningstar Process Pillar Rating: High
- Morningstar Parent Pillar Rating: Above Average
- Morningstar Category: EAA Fund Global Large-Cap Growth Equity
Analyst: Jeffrey Schumacher
The fund’s investment philosophy adheres to strict quality and growth criteria but is also mindful of valuations. A small number of companies are meticulously and patiently analyzed before finding their way to the portfolio. With only 20 to 25 stocks, the portfolio puts the managers’ highest convictions on full display. It has clear tilts toward high-quality growth stocks but is also relatively diversified over sectors compared with peers that apply a similar quality-growth strategy.
The managers have built an excellent long-term track record on the back of effective stock selection and outstanding downside resilience. However, it can see periods of underperformance given its concentrated nature and strong quality-growth tilt. Patience is required to fully benefit from the strengths of this unique approach.
Nordea 1 - Global Stable Equity
- Morningstar Medalist Rating: Bronze (on BI EUR share class)
- Morningstar People Pillar Rating: Above Average
- Morningstar Process Pillar Rating: Above Average
- Morningstar Parent Pillar Rating: Average
- Morningstar Category: EAA Fund Global Large-Cap Value Equity
Analyst: Natalia Wolfstetter
By design, this strategy offers a defensive profile. Its well-executed quantitative process looks for companies with stable earnings on top of low or moderate stock price volatility. The fund managers use a quantitative model to screen their universe of about 10,000 stocks and eventually build a portfolio of around 100 stocks that is not overly concentrated.
They also pay a lot of attention to valuations, which means that the portfolio has a distinct value tilt. To further assess risk, the managers monitor credit default swap spreads, implied and realized volatility, and changes in operational or financial leverage. The portfolio gravitates toward defensive sectors such as consumer staples and healthcare. The strategy has been effective in reducing risks. Its downside-capture ratios and maximum drawdowns are materially lower than peers’ over various time frames.
Stewart Investors Worldwide Leaders Sustainability
- Morningstar Medalist Rating: Silver (on the Class III share class)
- Morningstar People Pillar Rating: Above Average
- Morningstar Process Pillar Rating: High
- Morningstar Parent Pillar Rating: Average
- Morningstar Category: EAA Fund Global Large-Cap Growth Equity
Analyst: Michael Malseed
Stewart Investors Worldwide Leaders Sustainability has a unique process, with strong credentials in sustainable investing, and a focus on high-quality, lower-risk stocks, making it a dependable option in down markets.
The strategy targets companies that can contribute to sustainable human development, with the lowest ecological impact. Although the team places much emphasis on sustainability and stewardship, this isn’t a pure environmental, social, and governance fund. The team looks for durable franchises with high-quality management that is well aligned with shareholders. The process is genuinely long-term and patient, resulting in relatively low turnover. It leads to a portfolio that looks very different to the benchmark. The strategy has a growth bias with overweightings in the technology and healthcare sectors.
The author or authors do not own shares in any securities mentioned in this article. Find out about Morningstar's editorial policies.
