Investing globally has become an increasingly popular way for investors to diversify their portfolios and potentially increase returns. It’s a way to tap into the growth potential of markets beyond the home country, potentially reducing risk and providing exposure to wider structural trends.
Indeed, four of the ten most popular funds among Chelsea investors this ISA season have a global remit and the majority of our clients appear to be looking for global equity funds that focus more on growth than income.
With the global economy poised to slow this year, before rebounding next year, now could be good time to invest – getting in ahead of any potential bounce in markets, which tend to move ahead of economies, and also removing the need to guess which country could emerge strongest.
Investing in an actively managed global equity fund can also help you stay away from certain sectors that could struggle. For example, with many question markets over the banking sector today, a global equity fund that can cherry pick its holdings from every sector and every market around the globe could be more attractive than a tracker fund that has to invest in every stock in an index.
For those considering going global this ISA season, here are six suggestions, each doing something very different in the global equities space. You can find more global equity funds on the Chelsea Selection.
This fund invests in a diversified selection of global companies, which the manager believes have the potential for above average and sustainable rates of earnings growth. The companies may be based anywhere in the world, including emerging markets. The top ten holdings currently include Daiichi Sankyo, a Japanese pharmaceutical company, Mastercard, London Stock Exchange and Ferrari*.
The investment team behind this fund has a mantra: ‘don’t lose money’, which will possibly be as comforting to investors as the familiar names that can be found in the portfolio. The team, which operates as a boutique within Morgan Stanley, looks for high quality companies with defendable and visible future earnings, allowing the fund to give attractive returns to shareholders and reinvest in their business to stay ahead.
Chelsea’s managing director, Darius McDermott, spoke to Laura Bottega, managing director and lead portfolio specialist on the fund a couple of weeks ago to get the team’s current views and talk about the portfolio. You can watch the interview here.
Every investment in this fund has to meet four set criteria: thematic drivers, sustainable credentials, good fundamentals and attractive valuation. The team has identified three mega trends with strong and dependable growth prospects. These are better resource efficiency (cleaner), improved health (healthier) and greater safety and resilience (safer). Within these three buckets the team has identified another 20 areas of predictable and resilient growth.
CT Global Extended Alpha is a quality growth fund that buys high return on capital businesses experiencing sustainable structural growth. It has a structure, which allows the manager to extend investors’ potential returns by buying stocks he expects to do well and also looking to make money on stocks he expects to do badly (shorting). He describes this as “lining up on the starting grid for a motor race with an engine 50% bigger than everyone else’s”.
This fund looks for companies across a variety of industries which are set to benefit from the disruption that the next wave of technological change will bring about. Manager Mark Hawtin has a strong background in the technology sector, and uses this to identify themes of change, as well as find those firms that embrace these changes at the core of their business. The cross-industry approach means this is not just a tech fund and top ten holdings currently include companies in the industrial, healthcare, consumer discretionary and communication services sectors**.
The managers’ approach on this fund is refreshingly simple: understand the structural trends which are changing the world and then invest in the best companies which are benefitting from these trends. They combine this simple philosophy with detailed fundamental research and management meetings on individual stocks. The fund currently has its largest exposure to the healthcare sector and is invested in companies from the US, China, Europe, Israel and Hong Kong*.
*Source: fund factsheet, 31 January 2023
**Source: fund factsheet, 28 February 2023
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and do not constitute financial advice.