Which global fund should you choose for your ISA?

Global funds are hugely popular with UK investors. They currently have £183.7bn in the IA Global sector, according to the latest figures from the Investment Association*.

This is over £44bn more than IA UK All Companies, which is in second place with £139.2bn*. IA North America comes in a distant third with £93bn of funds under management*. However, not all global funds are the same – so which are worth considering?

Please remember that the value of investments will fluctuate and returns may be less than the amount originally invested. Tax treatment depends on your individual circumstances and the ISA and tax rules can change. Chelsea does not offer advice and so you must manage your ISA yourself.

What you need to know about global funds

While the allure of global funds is undeniable, not all funds in this sector are created equal. With over 500 options available, investors face the challenge of selecting the right fund for their goals. These funds, mandated to invest a minimum of 80% of their assets in international equities, offer broad exposure but come with a wide array of objectives. Some focus on established multinational corporations, while others concentrate on emerging markets. There are large and small cap options, and even thematic funds in the mix.

Choosing the right fund for you

That’s why you need to do your research. Decide which parts of the world you’d like exposure to and then hunt for a fund that fits the bill. To help in your search, we have selected five funds from within the IA Global sector, all of which have very different investment aims and objectives.

The abrdn Global Smaller Companies fund was launched in early 2012 and embraces the idea that smaller companies tend to outperform larger ones over the longer-term. Manager Kirsty Desson maintains a diverse mix of country, sector and stock selections, using the company’s proprietary ‘Matrix’ screening tool. This scrutinises holdings on the basis of four key factors: quality, growth, momentum, and value. Generally, a 100-strong best ideas list is then whittled down to a 50-60 stock portfolio. According to the most recent fund factsheet, industrials, information technology and consumer discretionary are the three most prominent sectors**.

The investment philosophy of the Morgan Stanley Global Brands fund is that high quality companies with dominant market positions can generate attractive long-term returns. The portfolio, which is run by a 10-strong team led by William Lock, head of the international equity team, was launched in October 2000. Its 10 largest holdings include household names such as tech giant Microsoft, cigarette manufacturer Philip Morris International, and consultancy company Accenture***. The team believes big brands have the distinct advantage of having more cues to help keep and stimulate consumer attention than either small brands or private label/own labels.

The flagship global equities strategy of Capital Group has a track record that goes back more than four decades. The Capital Group New Perspective fund invests in both early-stage businesses and established multinationals. Its unique multiple manager approach involves nine portfolio managers, as well as a team of research analysts, all contributing ideas. These stock suggestions, which currently include electric vehicle producer Tesla and pharmaceutical giant AstraZeneca**, are then blended together to create a diversified portfolio.

Lazard Global Equity Franchise is value-orientated strategy run by a four-strong team that looks for companies that have an edge in their respective business sectors. It can invest in any business around the world, but because the managers are looking for industry leaders, there is a natural bias towards larger companies. Healthcare is the most prominent industry sector currently with a 19% share of assets, followed by 16.6% in consumer discretionary, and 12.6% in utilities. Top holdings include CVS Health, eBay and H&R Block***.

Lastly, Invesco Global Focus is a high conviction, concentrated fund, which invests in structural growth winners. The philosophy behind the portfolio, which contains around 35 stocks, is to buy companies with entrenched competitive advantages and attractive valuations and then let them compound over time. Top ten holdings currently include the likes of Meta, Mastercard, Novo Nordisk and Uber**.

*Source: Investment Association, January 2024
**Source: fund factsheet, 31 January 2024
***Source: fund factsheet, 31 December 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 fund managers and do not constitute financial advice.