Funds in the global sector can invest anywhere in the world, but they go about this in different ways. Global funds vary not only by the countries and regions they invest in, but also by the types of companies and sectors they select.
Some focus on developed markets and 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 recovery potential, known as value investing. Some also focus on delivering a growing and sustainable income.
The global sector can also give you access to sectors that aren’t as common in the UK, such as technology. There’s no richer hunting ground than the whole world.
The UK makes up only a small part of the global stock market, so we think it makes sense to diversify your portfolio by investing in other countries. 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 well 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 Shortlist contains a selection of global funds we think have the best long-term performance potential. 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 them in the ‘Fund Reviews’ tab.
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.
Global stock markets have been for a wild ride over the past 12 months (to end of June 2020). Many spent Autumn 2019 flirting with negative territory, before investor sentiment improved and all the major markets finished 2019 with decent gains. They continued rising until mid-February and then collapsed dramatically as coronavirus became a global pandemic in March.
The UK was the hardest hit, falling over 30% in less than a month. Europe, at the time the epicentre of the outbreak, and the US, which was then predicted to see the next big wave of cases, also fared badly, falling 28% and 26%, respectively. No region escaped the tumult though, with the Asia Pacific region and emerging markets both falling more than 20%. Japan, which quickly and effectively responded to the virus, held up the best of the major markets, although its 18% fall could hardly be called desirable.
The worst of the falls were short-lived however. Less than a month after they began, markets quickly began to recover. This was largely fuelled by massive government and central bank intervention across the globe, designed to keep companies afloat amid the economic shutdown brought about by world-wide lockdowns.
The US and Europe were the highest risers, both gaining over 30% from the bottom of the falls to the end June. Japan and the Asia Pacific region rose 24% and 22% respectively, while the UK and emerging markets climbed 20%.
Although no major index has yet returned to their pre-crash peaks, investors who held their nerve and stayed invested through the extreme volatility may have done better than many who sold everything as markets fell but then, fearing further falls, missed out on the rapid recovery. Of course markets could indeed fall again – strategists are very divided on the outlook for the next 12 months.
There is still a lot of uncertainty – the potential for a ‘second wave’ of the virus, a global recession, an upcoming US election, and let’s not forget Brexit. But the swift market climbs from their lows highlight why we think time in the market, rather than trying to time the market, is the best way to grow your wealth over the long term, as long as you can stomach volatility along the way.
5 year performance of global stock markets
Past performance is not a guide to future returns. Source: Lipper IM* to 30/06/20.
The fund reviews below are provided for your interest but are not a guide to how you should invest. For more information, please refer to the Key Investor Information for the specific fund. Remember all investments, and income from them, can fall as well as rise in value so you could get back less than you invest. Past performance is not a guide to the future.
There’s a tiered charge to hold funds with HL. It’s a maximum of 0.45% p.a. View our charges. Comments are correct as at 30 June 2020.
Wealth Shortlist fund reviews
The managers invest in under-the-radar smaller companies from around the world for their higher growth potential than larger companies.
Veteran fund manager Harry Nimmo and Kirsty Desson champion the benefits of investing in companies considered too small by many other global fund managers. They look in both developed and higher-risk emerging markets to find businesses they think are high-quality, growing and have momentum behind them. Smaller companies have tended to perform better than larger ones over the long term but they’re more volatile and higher risk. The managers can use derivatives, which adds risk if they do.
Both recent performance and performance since the fund launched in 2012 has been very strong, although from 2016 until recently the fund had been run by another manager, so much of this performance can’t be credited to Nimmo and Desson. The fund was co-founded by Nimmo using his own investment philosophy, and Desson has been a long-standing member of the team, so we see no reason why they can’t continue the fund’s excellent long-term results, although there are no guarantees.
Daniel Roberts aims to provide a higher yield than the global stock market by investing in companies he thinks can reliably grow both their share price and dividends over many years.
Roberts likes easy-to-understand businesses with predictable earnings and sensible management. He has a fairly conservative investment approach, placing a lot of emphasis on sheltering investors’ capital. He normally invests in large companies from developed markets, but can also invest in smaller companies and emerging markets, and use derivatives, all of which add risk.
The fund has done well amid recent stock market volatility, performing much better than the IA Global Equity Income sector average and in line with the broader global stock market since the start of the year. Over the longer term it’s also delivered some of the strongest returns among its global income peers and has matched the global stock market. This is an impressive achievement for an income fund given how much global stock market gains have been driven by non-dividend-paying companies in recent years, although remember past performance isn’t a guide to future returns.
James Harries aims to grow both capital and income over the long-term by selecting companies he considers high-quality.
This fund invests in companies that James Harries thinks are financially sound and provide goods or services that are usually always in demand. These tend to be large businesses from developed regions like North America and Europe. The portfolio contains a small number of companies, so each can have a big impact on performance, both positively and negatively. Harries aims to grow income sustainably over time, but places more importance on total return. The fund can use derivatives, which if used increased risk.
The fund has performed strongly since Harries launched it in November 2016. It’s one of the best performers in the IA Global Equity Income sector, although hasn’t done as well as the FTSE World index. Remember past performance isn’t a guide to the future. Harries’ track record of over 15 years is also strong, and we expect him to keep performing well over the long term, particularly during market wobbles, although there are no guarantees.
This fund offers a simple and low-cost option for investing in a large number of companies from developed markets.
The managers invest in virtually all companies from the major developed-world stock markets including the UK. That means there are over 1600 companies in the portfolio. The managers uses their decades of experience and the scale of their organisation to keep costs low and closely match the performance of the global stock market.
They’ve done an excellent job since the fund launched in 2012. As with nearly all index trackers, the fund often marginally lags the index due to the costs involved, but it’s kept very close. We think it’ll keep up the good work over the long-term, although there are no guarantees.
James Thomson invests mainly in companies he thinks have the best long-term growth prospects, but also invests in some more stable ones that tend to do well in both economic ups and downs.
The manager likes to look off the beaten track to find companies he thinks will grow over the long term. He normally finds those among large companies from developed countries, and usually avoids higher-risk emerging markets and smaller companies, although he can invest in them.
Thomson also invests in a lot of companies well-known for their growth prospects. Large US technology firms such as Amazon, Adobe and PayPal currently make up the fund’s top 3 investments. US companies in general make up over half the current portfolio.
The fund’s done significantly better than the broader global stock market recently, and Thomson’s long term track record is also excellent. He’s beaten his benchmark by a fair distance. We think he’s highly skilled at picking companies for their long-term growth potential, though that’s no guarantee of future returns. Past performance is not a guide to the future.
Ben Whitmore and Dermot Murphy look for unloved companies that they think are attractively-priced and will return to favour.
The managers don’t chase companies with high-growth expectations, which they think can often be expensive. They like the unpopular or unfashionable ones whose shares can be bought for less than they think they’re worth. The managers invest in relatively few companies so each can have a big impact on performance, but it increases risk. So does the flexibility for them to invest in smaller companies and emerging markets.
Recent performance has been poor. Investors have favoured companies with high-growth expectations, leaving the managers’ favoured unloved companies behind. Their ‘value’ approach requires patience as it can take time for companies to recover, and the managers won’t get everything right.
The fund is still less than three years old, so we think it’s too early to properly judge performance. Whitmore has lots of experience running other value-focused funds in a similar way though. We think his experience and track record bode well for this global fund over the long-term, although there are no guarantees.
The fund aims to track the FTSE World (excluding UK) index as closely as possible, by using the scale and know-how of Legal & General, one of the largest providers of tracker funds in the UK.
The fund invests in over 2,000 companies across most of the world’s major economies. It doesn’t invest in any UK companies though. The amount invested in each country depends on its share of the global stock market. That’s why over half the fund is invested in the US, followed by Japan and European countries like France and Switzerland. The fund also invests in emerging markets, which adds risk.
It’s done a good job at hugging the index as closely as possible. Part of that is down to keeping its charges low, as charges hold back performance. We think it’s an excellent low-cost option for investing in a very broad range of global companies.
Jacob de Tusch-Lec aims to deliver a higher income than the global stock market average by investing in some out-of-favour companies.
There aren’t many global income funds like this one. The manager invests in lots of unloved companies he thinks could return to favour, and who tend to offer higher yields than higher-quality, growing companies. This means performance can often look very different to the benchmark and its peers. De Tusch-Lec also invests in some higher-risk smaller companies and emerging markets, and can invest in high-yield bonds and derivatives, which add risk if he does.
The manager’s ‘value’ investing style has been out-of-favour for several years, which has led to poor performance. During recent market volatility, many investors sought out the perceived shelter of high-quality companies, meaning returns have fallen further still behind the benchmark and the IA Global Equity Income sector.
Investing as de Tusch-Lec does requires patience, and it won’t always work. We think it’s important for a portfolio to contain a range of different investment styles though, as they fall in and out of favour over time, and what works well now may not work so well in the future.
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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.
Our expert research team provide regular updates on a wide range of funds.