Top 100 Funds: Global growth (9 Funds)

NEW ENTRANT: Standard Life Investments Global Smaller Companies (GB00BBX46522)

Standard Life Investments Global Smaller Companies launched in January 2012, since when it has made strong returns relative to MSCI World Small Cap index and the IA Global sector average returns. 

The fund is run by Alan Rowsell who follows the approach used very successfully with Standard Life UK Smaller Companies Trust (SLS), run by highly regarded manager Harry Nimmo, by whom he is supported, together with the company’s wider equities team. They select shares via a three-stage approach, which includes assessing a company’s quality, growth, value and momentum characteristics, and have a preference for high-quality business models with recurring revenues and strong cash flows.

“The team wants the small companies that become large ones,” says Ben Yearsley, director at Shore Financial Planning. “They think the way to outperform with small-caps is to focus on high-quality companies and avoid low-quality ones. They run their winners, and if they have a clear idea about what they are looking for they don’t get side-tracked into other areas.”

Standard Life Investments Global Smaller Companies is mainly focused on developed markets, with about 43 per cent of its assets in the US and 12 per cent in the UK, although it also includes exposure to emerging markets such as China.

The exposure to smaller companies and emerging markets means this fund is not suitable for lower-risk investors. But if you have an investment horizon of at least five years and a high risk appetite meaning you can tolerate bouts of volatility, this fund could provide more strong growth in the years to come.

NEW ENTRANT: Jupiter Global Value Equity (GB00BF5DRJ63)

Value investing – buying equities when the price seems lower than you think it should be – has not done well for much of the past decade. But many commentators and analysts think the investment environment is changing and value could once again become a successful way to invest.

If this is the case, Jupiter Global Value Equity Fund could be a good way to capture value’s return. Although the fund only launched in March this year, its co-manager, Ben Whitmore, head of strategy for value equities at Jupiter, is a seasoned value investor who can outperform even when this style of investing isn’t in favour. He has run Jupiter UK Special Situations (GB00B4KL9F89) since November 2006, which beats the FTSE All-Share index and IA UK All Companies sector average over three, five and 10 years, and by quite a margin over the latter period. And he has run Jupiter Income (GB00BQXWPW10) since the start of 2013, which has beaten the FTSE All-Share index and the IA UK Equity Income sector average over three and five years.

When selecting holdings, Mr Whitmore and co-manager Ben Murphy’s analysis includes assessing the strength of a company’s market position in comparison to its competitors, any recent or potential changes in its industry, and its ability to turn profits into cash. 

The fund’s X share class has a very low ongoing charge of 0.53 per cent.

But as it can take some time for value equities’ prices to reflect their worth, value funds can go through periods of underperformance. So if you invest in this fund you should have a long time horizon of five years or preferably longer, and a high risk appetite.

See our tip in the issue of 11 May for more on this

F&C Global Smaller Companies Investment Trust (FCS)

F&C Global Smaller Companies Investment Trust historically has a good performance record, but in 2014 and 2016 lagged MSCI World Small Cap index, and wasn’t very far ahead of it last year. As it has outperformed its benchmark considerably in the past, we think it’s worth waiting to see if it can do this again, in which case its discount to NAV could swing back to the premium it has traded on when it has been doing better.

The trust invests in smaller quoted stocks that display the potential for superior growth, in particular in the US, UK and Europe, so over time it could make strong returns. It invests in areas where its management team has less experience via funds, for example Japan, Asia, Latin America and Africa.

Although not a high-yielder, the trust’s dividend has risen for 48 consecutive years. In its last financial year it paid out 14.4p, up 17.6 per cent on the year before. 

Scottish Mortgage Investment Trust (SMT)

Scottish Mortgage Investment Trust is one of the top-performing global funds and makes returns well ahead of broad global equity indices such as FTSE World. It also has one of the lowest ongoing charges of all active funds at 0.37 per cent, making it an excellent core holding for many portfolios – as long as you have a long-term investment horizon and higher risk appetite. Although its long-term returns are outstanding, it can be volatile over shorter time periods.

Its risk profile has increased in recent years because it now holds 38 unquoted companies, which account for 15 per cent of its portfolio. These have the potential to boost returns, but could also incur substantial losses. The trust is also fairly concentrated, with the top 10 holdings accounting for over 50 per cent of its assets.

The trust’s managers look for strong businesses with above-average returns, and have no fixed limits on geographical, industry or sector exposures.

Monks Investment Trust (MNKS)

Monks Investment Trust is run by the same asset management company as Scottish Mortgage – Baillie Gifford – but by a different team with a lower-risk approach. So if you don’t want the risks and potential volatility of Scottish Mortgage Investment Trust, this might be a good alternative.

Three years ago manager Charles Plowden introduced an investment process that had delivered very strong returns for another fund his team runs, Baillie Gifford Global Alpha Growth (GB00B61DJ021). And it has so far produced great results: Monks beats broad indices such as FTSE World over one and three years, and is ahead of most of its peers in the AIC Global sector.

Monks is less concentrated than Scottish Mortgage, with its top 10 holdings only accounting for about a quarter of its assets, and it has virtually no exposure to unquoted companies. “The willingness to trim stocks based on valuation grounds also differentiates Monks from Scottish Mortgage, and leads to a different risk profile,” add analysts at Numis Securities.

The trust’s very reasonable ongoing charge of 0.52 per cent could fall further as it introduced a further tier to its fee structure on 1 May, meaning all assets above £1.75bn will be charged at 0.3 per cent of assets. Before this, all assets over £750m were charged at 0.33 per cent. The trust had assets of about £1.9bn at the end of July.

Rathbone Global Opportunities (GB00B7FQLN12)

Rathbone Global Opportunities has a good record of beating global indices such as FTSE World and is in the first quartile of the IA Global sector in terms of performance over one, three, five and 10 years.

The fund’s managers look to invest in under-the-radar and out-of-favour growth companies, but also hold a defensive bucket of holdings that are less economically sensitive, with slower and steadier growth prospects, for risk management purposes.

The fund’s positioning is largely determined by where lead manager James Thomson believes the best investment opportunities are, although he avoids direct holdings in emerging markets.

Lindsell Train Global Equity (IE00BJSPMJ28)

Lindsell Train Global Equity is among the top 10 best performers in the IA Global sector over one, three and five years, and beats broad global indices such as MSCI World over these periods. Its management team includes highly regarded manager Nick Train, who has made very strong returns with his funds over the years.

They run a concentrated portfolio, typically of 25 to 30 shares, with a heavy emphasis on consumer companies. They invest in what they view as durable, cash-generative business franchises and hold them for the long term. They favour companies with a sustainable high return on equity and low capital intensity.

Lindsell Train Global Equity has a reasonable ongoing charge of 0.54 or 0.74 per cent, depending on which share class your platform offers. The fund rarely buys or sells shares, so trading costs don’t eat into a lot of its returns.

Fundsmith Equity (GB00B41YBW71)

Fundsmith Equity is among the top-performing funds in the IA Global sector over three and five years, and consistently beats broad indices such as MSCI World. 

Its manager Terry Smith targets companies that are resilient to change, with attributes such as the ability to sustain a high return on operating capital, advantages that are difficult to replicate, no need for significant leverage and a certainty of growth from reinvestment of cash flows at high rates of return. He also likes to invest in companies he thinks have attractive valuations.

The fund is very concentrated, with fewer than 30 shares, which it looks to hold for the long term. Consumer staples, healthcare and technology shares account for the majority of its assets, and over 60 per cent of its assets are listed in the US, although include global multinational companies.

“The investment approach is clear and disciplined, and has resulted in impressive performance since launch in 2010,” says Rob Morgan at Charles Stanley. “Although we would normally like to see a longer track record for a manager through a variety of economic cycles, the fund benefits from a close-knit and stable team we believe could continue to perform well over the longer term.”

Witan Investment Trust (WTAN)

Witan Investment Trust’s in-house investment team sets an asset allocation and then gets 10 external managers to select shares to implement it. This means the trust is very well diversified across developed market equities and sectors, as well as manager investment styles and individual shares. It provides some exposure to alternative assets such as private equity via holdings the in-house team selects.

The trust has increased its dividend for 43 consecutive years and expects to increase it again this year, fully funded from its current-year revenues in line with its policy of increasing the total annual dividend ahead of inflation.

Witan could be a good core holding for small portfolios that are not large enough to invest in a wide range of funds. And it could account for the bulk of the equity allocation of investors who do not have the time or inclination to asset allocate or research funds.

Unicorn Mastertrust (GB0031218018)

Unicorn Mastertrust is a fund of investment trusts that aims for growth by investing in global equities and alternative assets such as private equity. It is in the top quartile in terms of performance in the IA Flexible Investment sector over one, three, five and 10 years.

It could be a good core holding in small portfolios, or as the equity allocation of investors who do not have the time or inclination to choose their own funds.