Get growth with less volatility via Troy Trojan Global Equity

But if you are not keen on volatility, an equity fund that takes a defensive approach and tries to smooth out the returns, such as Troy Trojan Global Equity (GB00B0ZJ5S47), could be more palatable. This fund has been managed by Gabrielle Boyle since 2011, and George Viney has been deputy manager since 2016.

Ms Boyle’s strategy is to grow capital, but with a strong emphasis on capital preservation -– as is the case with all Troy Asset Management's equity funds. She buys quality stocks that will grow their revenues and share price over time, but remain resilient in economic downturns and when markets fall after becoming overvalued.

The fund is relatively concentrated with only around 30 stocks. These are typically global megacaps with predictable and repeatable cash flows, and strong business franchises and brands. About a third of the fund's assets are in consumer sector companies, with about a fifth in healthcare and over 18 per cent in technology. Its 10 largest holdings include Microsoft (US:MFST), American Express (US:AXP), PayPal (US:PYPL) and Novartis (SWI:NOVN). 

Since Ms Boyle started running the fund in 2011, MSCI World index has gone through five periods when it fell by more than 6 per cent, two of which were in 2018. In all of these periods, Troy Trojan Global Equity Fund outperformed both this index and the Investment Association (IA) Global sector average. Between 15 April 2015 and 12 February 2016, the index fell 13.6 per cent, but the fund only fell 1.7 per cent.

The fund also has better defensive statistics. Over the past seven years its annualised volatility is 10.92 per cent, whereas MSCI World’s is 12.19 per cent. The annualised maximum drawdown, the most you could have lost if you bought the fund at its highest point and sold it at its lowest point in any calendar year since 2011, was 8.48 per cent in contrast to 14.03 per cent for the index. And this has not come at the expense of long-term returns: over five years the fund has made 89 per cent, versus 72 per cent for MSCI World and the IA Global sector average of 56 per cent.

Troy Trojan Global Equity has underperformed broad market indices and other global equity funds over short-term periods when markets are rising. This is because it rarely allocates to high-growth stocks in sectors such as technology, or in-demand cyclical sectors such as oil and mining, which drove markets higher between 1 June 2016 and 31 December 2017. During this period MSCI World index rose 43 per cent and the IA Global sector average return was 40 per cent, but Troy Trojan Global Equity only returned 35 per cent.

This fund is heavily weighted to the US, where it has 66 per cent of its assets. Europe ex UK is the next biggest weighting at 15 per cent. This means it may not provide significant geographic diversification from US or global funds.

However, as there is no clear consensus on which sectors or types of stocks will drive returns going into 2019, and markets look set for a rough ride, funds that exhibit stability could make sense. So if you want to maintain exposure to equities with the potential for long-term growth while trying to mitigate large market falls, Troy Trojan Global Equity still looks like a good option. Buy. TL

Troy Trojan Global Equity (GB00B0ZJ5S47)

Source: Morningstar as at 11/12/18 *Troy Asset Management as at 31/12/18

Performance

Source: FE Analytics as at 10/12/18

Top 10 holdings as at 31 October 2018 (%)

Source: Troy Asset Management

Sector breakdown as at 30 November 2018 (%)

Source: Morningstar