Even though equity markets have been volatile in recent months, now is not the time to abandon them. As April’s strong rally demonstrates, stocks can recover almost as quickly as they fall. But with the world economy in disarray and investors appearing sensitive to any fresh developments, you should make sure your equity holdings are resilient.
Strong record of picking growth businesses
Reliable in different market conditions
Exposed to volatile markets
And an equity fund that that has shown consistent resilience over many years is Rathbone Global Opportunities (GB00BH0P2M97). Its manager, James Thomson, who has worked on the fund since 2003, looks across developed markets for innovative, scaleable businesses that are growing quickly and disrupting their industries. These names must be “easy to understand, different to their competitors, durable to change and difficult to imitate”, with plans to grow rapidly without overstretching their resources. And, importantly, Mr Thomson and his team try to identify such businesses before they become household names.
The fund’s largest holdings at the end of March included established market leaders such as Amazon (US:AMZN), Tencent (HK:700), Mastercard (US:MA), PayPal (US:PYPL) and Visa (US:V). Holdings with a lower profile included cloud-based phone call services provider RingCentral (US:RNG) and Sartorius Stedim Biotech (Fr:DIM), which provides products and services for the biopharma industry. The fund’s holdings in companies that its managers think will become market leaders are balanced with a “defensive bucket” of companies that have slow and steady growth, and should prove less sensitive to economic changes.
Rathbone Global Opportunities has exposure to a variety of different regions and company sizes. Nearly two-thirds of assets were in the US at the end of March, with just under 30 per cent in continental Europe alongside small allocations to the UK and Asia Pacific.
Although the fund's managers have traditionally had a preference for mid-sized growth companies in developed markets, nearly 80 per cent of its assets were in large-cap companies at the end of March, with around a fifth in mid-caps. This is because Mr Thomson wants defensive holdings in the current environment. In an investor update on 26 March he explained that: “Investors want to pay up for visibility, predictability, liquidity, solvency, low levels of debt and long-term growth.”
So he has recently been focusing the fund on larger companies and US stocks, in areas such as technology, healthcare equipment and food and consumer staples. And the managers have avoided “deep value” areas such as oil and gas. They also generally avoid investing in emerging market stocks and businesses that have previously performed poorly, and remove stocks quickly if any signs of structural issues emerge.
Rathbone Global Opportunities has performed relatively well so far this year, with a small positive return over the first four months of the year in sterling terms, during which period MSCI World index fell nearly 10 per cent and the Investment Association (IA) Global fund sector average return was a loss of 8.6 per cent. And the fund has performed strongly in both good and bad markets, beating the IA Global sector average return in every calendar year since 2010, with the exception of 2016. Rathbone Global Opportunities has also beaten MSCI World index in most of these years.
This fund cannot entirely avoid any future market volatility, while holdings such as Amazon mean it is vulnerable to any shift in fortunes for the tech giants or dominant growth investing style.
However, this fund continues to follow a strategy that has served investors well over many years and in different market conditions. So even if it experiences short periods of underperformance and volatility it looks well placed to continue delivering strong total returns over the long term. As a result, if you're a growth investor with a long-term investment horizon, Rathbone Global Opportunities still looks like a good way to get exposure to resilient equities. Buy. DB
|Rathbone Global Opportunities|
|IA Sector||Global||Sharpe ratio||0.85|
|Fund type||Unit trust||Standard deviation||14.60%|
|Fund size||£1.7bn||Ongoing charge||0.53%|
|No of holdings||59*||Yield||0.23%|
|Set-up date||09-May-01||More details||www.rutm.com|
|Manager start date||James Thomson: 01/11/2003|
|Source: Morningstar, 5 May 2020, *Rathbones, 31 March 2020|
|Fund/benchmark||1-year total return (%)||3-year cumulative total return (%)||5-year cumulative total return (%)||10-year cumulative total return (%)|
|Rathbone Global Opportunities||5.52||37.97||90.4||241.44|
|IA Global sector average||-2.55||13.12||40.26||109.29|
|MSCI World index||-1.31||16.56||49.54||153.83|
|Source: FE Analytics, 5 May 2020|
|Top 10 holdings|
|Sartorius Stedim Biotech||2.5%|
|Source: Rathbones, 31 March 2020|
|Europe ex UK||29.0%|
|Cash and equivalents||1.6%|
|Source: Rathbones, 31 March 2020|