Global Growth Funds: Go for Steadiness Over Sizzle
When it comes to global equity fu
nds, I favour core offerings that I believe have long-term staying power. A global offering is a key part of a long-term asset allocation program, and not something where you want a lot of unexpected risk or to have to shift things around a lot. This means I am naturally quite sceptical of funds that sit at the top of the performance charts over short periods of time, as they are almost always those that have exposure to narrower or higher risk segments of the market. This is of course, a general problem with "leaders" tables--they tend to highlight the outliers in terms of fundamental exposure. Coming into 2007, for example, the leaders tables for many sectors would have been packed with mid-cap oriented funds. We know how that turned out.
Aberdeen World Equity: A Disciplined Approach
One offering that nicely fills the bill is Aberdeen World Equity. Like all Aberdeen equity offerings, this one focuses on securities that the team believes are of high quality, but trade at cheap prices. As such, the fund will be at a disadvantage in markets where the priciest or lower quality shares lead the way. However, that same discipline helps limit the fund's exposure to price risk and fundamental business risk. That was on display over the past year through 15 July: Whilst the average fund in the sector fell 15.5% in the period, this fund dropped just 10.6%. Aberdeen's disciplined process and research strength has also helped it perform strongly over the longer-term: Its three- and five-year returns rank in the sector's top quartile and top third, respectively.
M&G Global Leaders: A Well Run Fund for More Aggressive Investors
For investors seeking an offering with a bit more edge, we continue to admire Aled Smith's M&G Global Leaders fund. Smith uses a CFROI discipline to look for firms that are improving their cash returns on capital and are trading at a discount to what he thinks they are worth. The portfolio is fairly compact and volatility is on the high side, but Smith's stock-picking has been strong. Despite an overweight in US equities relative to his sector peers (38% vs. 29% of equities, although the fund is actually underweight relative to the MSCI World index) the fund has delivered excellent long-term returns. We've also been impressed with the quality of M&G's equity research in general--after a difficult period, David Jane and company appear to have returned the firm to a position of strength.
A version of this article previously appeared in Investment Adviser, Financial Times Ltd.
