Join our community of smart investors

Diversify your portfolio with Rathbone Global Opportunities

Rathbone Global Opportunities is a good way to diversify portfolios
August 3, 2017

Markets face a number of potential upsets: developed markets such as the US seem to be on excessively high valuations, central banks may increase interest rates or withdraw quantitative easing, and from a UK perspective, Brexit is less than two years away but the terms and consequences of the departure are far from clear.

IC TIP: Buy at 196.82p
Tip style
Growth
Risk rating
High
Timescale
Long Term
Bull points

Strong long-term growth

Proven investment process

Reasonable ongoing charge

Portfolio diversifier

 

Bear points

Potential for volatility

So now, more than ever, the best course of action for many investors is to have a well-diversified portfolio, meaning that if there is a blow-up in one area, the other parts will hopefully hold up. And a good basis for a diversified portfolio is a global equities fund such as Rathbone Global Opportunities (GB00B7FQLN12).

 

This fund beats global indices such as FTSE World and MSCI AC World over one, three and five years. It is also among the top 25 per cent of funds in the Investment Association (IA) Global sector in terms of performance over three and five years.

The fund's investment team aims to identify global themes and invest in them early, via companies with innovative products and services, sustainable business models and barriers to entry. They look for undiscovered, out-of-favour growth companies, favouring scalable businesses with entrepreneurial and flexible management teams. They also look for short-term catalysts for share price outperformance such as earnings upgrades, customer wins and positive news flow.

Meeting company managements is another important part of the investment process and they conduct around 200 meetings a year.

Companies are selected according to their individual merits, but with regard to broader macro influences. The fund's positioning is determined largely by where lead manager James Thomson believes the best stock-specific opportunities lie, although he avoids direct holdings in emerging markets. Only about 10 per cent of the fund's assets are listed in the UK, meaning it is a good diversifier for UK investors, who often have a bias to the home market.

Mr Thomson and co-manager Sammy Dow are supported by around 40 external brokers and sell-side analysts.

"This fund is a truly active, unconstrained growth fund run by an experienced manager," comment analysts at research company FundCalibre. "James' high conviction contrarian strategy has proven itself over many years. He is not afraid to admit his weaknesses or past errors, a refreshingly honest approach, which allows him to concentrate on his core strengths."

Mr Thomson sells holdings for reasons including changes in a company’s business model, competitive positioning, management, supply/demand dynamics, regulation or deteriorating fundamentals. Extreme valuations, either way, may also be a warning sign.

Rathbone Global Opportunities also has a reasonable ongoing charge of 0.79 per cent.

Over one year the fund is in the second rather than first quartile of the IA Global sector in terms of performance. And it can invest in smaller-sized companies such as mid-caps, which can be higher risk and more volatile than larger ones.

It also has more than half of its assets listed in the US – a market considered to be expensive.

However, over one year the fund still beats the IA Global sector average with a double-digit positive return of 19 per cent, and holds a defensive bucket of holdings that are less economically-sensitive, with slower and steadier growth prospects, to help manage risk. Analysts at FundCalibre point out that "these core holdings have helped reduce the fund's volatility".

Although mainstream US indices are overvalued, the fund does not buy the entire market – it typically has 40 to 60 holdings drawn from across the world. And its managers look for reasonable valuations combined with earnings upgrades and the possibility for multiple expansion, though they will pay up for strong growth prospects.

So if you want a good basis for a diversified portfolio via a manager who has proven his ability to deliver strong long-term returns, Rathbone Global Opportunities looks like a good option. Buy.

RATHBONE GLOBAL OPPORTUNITIES (GB00B7FQLN12) 
PRICE196.82pMEAN RETURN19.27%
IA SECTORGlobalSHARPE RATIO1.54
FUND TYPE Unit trustSTANDARD DEVIATION11.23%
FUND SIZE£1.06bnONGOING CHARGE0.79%
No OF HOLDINGS60*YIELD0.28%
SET UP DATE09/05/2001*MORE DETAILSwww.rutm.com
MANAGER START DATE01-Nov-03  
Source: Morningstar, *Rathbones.
Performance
 1 year total return (%)   3 year cumulative total return (%)5 year cumulative total return (%)
Rathbone Global Opportunities19.2570.81123.26
IA Global sector average17.7345.6388.53
FTSE World TR GBP index18.1856.56106.92
MSCI AC World Index NR USD index17.8953.4798.92
Source: Morningstar as at 31 July 2017 
Top ten holdings as at 30 June 2017 (%)
Align Technology2.69
Amazon.com2.54
Tencent2.45
Facebook2.40
Activision Blizzard2.33
Electronic Arts2.16
Eurofins Scientific2.05
Visa2.05
Adobe Systems2.04
AO Smith1.94
Source: Rathbones
Geographic breakdown (%)
US57.33
Europe ex UK28.00
UK9.89
Asia Pacific2.45
Cash2.33
Source: Rathbones