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Global sector

Global sector

Funds in this sector tend to focus on capital growth and can differ markedly from each other in terms of exposure to sectors, countries or regions.

Jonathon Curtis - Investment Analyst
6 June 2019

Funds in the global sector can invest anywhere in the world. But they go about this in different ways. Global funds will vary in how much they can invest in certain types of companies, sectors, countries, or regions. Some focus on developed markets or large multinational corporations, while others invest more in higher-risk emerging markets or smaller companies. Some target companies with higher growth expectations and others search for unloved companies with the potential to recover.

The global sector also gives you access to industries that aren’t as common in the UK, like technology, cars and agriculture.

There’s no richer hunting ground than the whole world.

Our view

Different stock markets around the world have different drivers of returns. Some markets may rely on commodity prices, while others are more sensitive to currency fluctuations, or government policies. It’s difficult to know which market will do best from one year to the next.

By investing across lots of countries, you don’t have to guess which market will perform best and it helps spread the risk.

The Wealth 50 contains a selection of global funds we think have the best combination of long-term performance potential and low fund charges. They have different investment styles and areas of focus – each will go in and out of favour, so we think it makes sense to invest in a variety. You can find out more about some of these, and others in the global sector, in the ‘Fund Reviews’ tab.

You could also invest in a ready-made portfolio of funds investing around the world, such as the HL Multi-Manager Special Situations Fund. It benefits from our in-house research and we think the additional costs are justified by the benefits of this approach. This fund has some exposure to higher-risk smaller companies and emerging markets, and is managed by our sister company HL Fund Managers Ltd. Please note the fund currently holds shares in Hargreaves Lansdown PLC.

HL Multi-Manager Special Situations Key Investor Information

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Performance

It’s been a turbulent 12 months for global stock markets to 30 April 2019. None of the major markets escaped the volatility at the end of 2018. The biggest fallers were the US and Japan. The US recovered well though, and was the top performer over the last 12 months. Japan still has some way to go to get back to where it was before the tumble, and it’s lagged the other major markets during the period.

Emerging markets were strongest during the volatility, falling less than the rest. That’s unusual as they’re normally more volatile. It goes to show past performance doesn’t guarantee future returns.

Investor worries about Brexit and the UK economy seem to be fading. That’s helped the UK perform broadly in line with other major markets such as Europe and Asia Pacific. We view the UK as a great place to invest, and think it should form at least part of most investors’ global portfolio.

Investor sentiment globally also appears to be improving. A big part of that is down to the US looking less likely to raise interest rates in 2019. Low interest rates encourage businesses to borrow and invest, and decreases the cost of their debt. The future is always uncertain though. We think it’s best to invest in a wide variety of countries, as you can never be sure where the best performance will come from next.

5 year performance of global stock markets

Past performance is not a guide to future returns. Source: Lipper IM to 30/04/19.

Investment notes

Please remember past performance is not a guide to future returns. Where no data is shown, figures are not available. This information is provided to help you choose your own investments, remember they can fall as well as rise in value so you may not get back the original amount invested.

Five year performance

  • FTSE World TR GBP

    +86.48%

Source: Lipper IM to 30/04/2019. Please remember past performance is not a guide to future returns.

Fund reviews

We regularly review all the major investment sectors. Here we provide comments on a selection of funds in the Global sector. They're provided for your interest and not as a guide to how you should invest. If you're unsure if an investment is right for your circumstances please seek personal advice. Comments are correct as of May 2019.

All investments can fall as well as rise in value so you could get back less than you invest. Please note the review period may be over a short time period and past performance is not a guide to future returns.

To view a full list of our favourite funds within the sector, visit the Wealth 50.There’s a tiered charge to hold funds with HL. It’s a maximum of 0.45% p.a. View our charges.

Wealth 50 Fund reviews

Other funds in this sector

Source for performance figures: Financial Express

Jacob De Tusch-Lec likes to look off the beaten track. He invests in different companies from most other global income fund managers, which we like.

De Tusch-Lec isn’t afraid to invest in sectors shunned by other investors. While many are put off sectors that’ve had poor short-term performance, he often sees opportunities for long-term gains. There will be times when investing this way won’t work though. He invests in some smaller companies and ones from emerging markets, and can use derivatives to help him invest. All these things add risk.

The fund’s recent performance has been poor. It fell heavily during 2018’s end-of-year volatility and hasn’t fully recovered. A big part of that’s down to investments in unpopular areas like basic materials, oil and gas, and financial companies. While disappointing, we believe investors should focus on the longer term. Over several years De Tusch-Lec’s proven he’s a talented manager and we think he’ll do better in the future, although there are no guarantees.

The managers invest in a small selection of businesses they believe have wonderful brands and are strong enough to keep growing decades into the future.

Nick Train, Michael Lindsell and James Bullock have become well-known for their simple investment philosophy. They invest in companies that offer something unique, whether a brand, product, service or experience. And then they stay invested as they think those companies will keep growing year after year.

They don’t think there are many of these businesses around though, so they only invest in a small number of them. That means each one can make a meaningful difference to performance, but it’s a higher-risk approach. The fund’s had a strong 12 months, driven in large part by consumer services. Those include sports entertainment companies like World Wrestling Entertainment and Juventus Football Club.

As this is an offshore fund you’re not normally entitled to compensation through the UK Financial Services Compensation Scheme. The fund currently has a holding in Hargreaves Lansdown plc. The managers also have the flexibility to invest in higher-risk smaller companies.

Nick Clay and his team take a disciplined approach to investing. They only invest in companies paying an above-average income and will sell if a company’s yield falls below the global average.

The managers think dividends compounded over time will be the largest driver of stock market returns in the coming years. That’s why they’re on the hunt for companies paying at least 25% more income than the global average. To avoid ones paying an unsustainably high income they only invest in financially strong businesses and prefer those less sensitive to the ebb and flow of the economic cycle. Their approach has worked well recently and the fund’s beaten the global stock market benchmark over the past 12 months.

This is a concentrated portfolio, so each investment can contribute significantly to performance, but it is higher risk. The manager also has the flexibility to invest in smaller companies and emerging markets, both of which add risk.

Andrew Greenup and Peter Meany invest in companies around the world that provide our essential services: energy, communications and transport.

The managers normally invest in infrastructure companies in developed countries like the US, Japan and Australia. Part of the fund invests in emerging markets, which increases risk. Areas they invest in include things like toll roads, oil pipelines and satellites. They aim to find companies that can grow steadily and sustainably over the long term.

The fund’s grown more than the global stock market average recently, but it’s not done as well as its infrastructure benchmark. Gains were held back by poor returns from utility companies. The portfolio contains a relatively small number of companies. This can help performance if they do well, but it’s riskier than a more diversified approach.

Terry Smith invests in a small number of financially-strong, resilient businesses, and aims to stay invested in them for the long term.

The fund did well over the past year, delivering a higher return than its benchmark. Smith invests more than the global stock market average in the US, which was the best performing of the major markets. The fund also benefitted from strong results from industrial companies like Automatic Data Processing and Kone.

Smith doesn’t often buy or sell companies. In the past year he made a new investment in seasoning and spices maker McCormick & Co and sold consumer goods giants Nestle and Colgate-Palmolive. This is a concentrated portfolio, so each investment can contribute significantly to performance, but it’s a higher-risk approach.

This fund offers something different to many other global funds. Alan Rowsell invests in companies considered too small by many other managers, but he thinks have big potential for growth.

Alan Rowsell thinks innovative and financially-strong, smaller companies can deliver excellent long-term results. Investing in smaller companies is a higher-risk approach though. He mainly invests in ones from developed markets from across the globe, but he also invests in some higher-risk emerging markets. Rowsell prefers businesses that are already successful and he thinks could keep growing.

Over the long-term the fund’s beaten its benchmark. It’s done better over the past year too. Investments in technology companies have played a big part in that. This is a concentrated portfolio, so each investment can contribute significantly to performance but it’s a higher risk approach.

Latest research updates

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The fund’s new manager has been at the helm for around a year now. Find out what changes he’s made and what impact it’s had on the fund’s performance.

Standard Life Global Smaller Companies - letting winners run

Standard Life Global Smaller Companies - letting winners run

Fri 24 May 2019

Alan Rowsell invests in companies when things are going well, and he thinks the good times will continue. In this update we’ll look at some he’s been buying and selling.

VIDEO: Rathbone Global Opportunities - opportunities among outcasts

VIDEO: Rathbone Global Opportunities - opportunities among outcasts

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James Thomson invests in businesses other investors have turned their back on. But among those cast-aside companies he sees opportunities for long-term growth.

Fidelity Global Special Situations - cautious and company-focused

Fidelity Global Special Situations - cautious and company-focused

Tue 30 April 2019

Find out what’s happened with the fund and what Jeremy Podger did during recent market volatility.

Newton Global Income - strictly come dividends

Newton Global Income - strictly come dividends

Tue 09 April 2019

Find out what’s been happening with the fund and why Nick Clay believes investors should think about risk and not just returns.

Investment notes

Please note the research updates are not personal recommendations to trade. If you are unsure of the suitability of an investment for your circumstances please seek advice. Remember all investments can fall as well as rise in value so investors could get back less than they invest.

Fund research

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