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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
21 December 2018

It’s natural for UK investors to focus on funds investing in their home market. But as the world has become more connected, so has the investment landscape. There are lots of funds investing across the globe, and these provide a great way to diversify an investment portfolio.

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

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 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.

Otherwise you can 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.

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

Most global stock markets fell over the past year. Concerns over rising interest rates, which makes the potential returns from shares look less attractive, and other geopolitical issues, like the trade war between the US and China, have spooked investors.

The US is the only major market to make a meaningful gain over the past year. This has been a key driver of the broader global market because it makes up more than half of it. It’s also been the best performer over the past five years, driven by giant tech firms like Apple, Amazon, Facebook and Microsoft.

They’ve been more volatile recently though. The same goes for some other higher-growth names that had previously done well. It’s a reminder that markets go through tough times too.

Japan is the next best-performing market over five years, although like most other major markets it’s dipped more recently. Japan’s Prime Minister Shinzo Abe has introduced a number of measures to stimulate the economy since his election in 2012. These have generally been seen as a good thing for investors. Japan’s the third biggest economy in the world, but it’s often overlooked by investors. We don’t think it should be ignored.

The UK’s been the worst performer over the last five years, although it’s fared better than many other markets over the past 12 months. Despite that, worries about Brexit, political instability, and among the lowest growth of the G7 economies have worried many investors. But we think it still offers a lot of potential. There are lots of great businesses in the UK and they have the potential to do well regardless of what’s going on in the wider economy.

Past performance is not a guide to future returns. Source: Lipper IM to 30/11/18.

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.

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 November 2018.

All investments can fall as well as rise in value so you could get back less than you invest.

To view a full list of our favourite funds within the sector, visit the Wealth 50. There is a tiered charge to hold funds with HL. It is 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

Ben Whitmore and Dermot Murphy look for cheap and unloved companies around the world that they think will return to favour.

The managers invest differently from many other global fund managers. They don’t chase companies with high-growth expectations, which can often be expensive. They like the unpopular or unfashionable ones whose shares can be bought for a bargain. This is called ‘value investing’ and it has often done better than investing for growth, although in recent years it’s been unpopular with investors.

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.

The fund launched fairly recently but Whitmore has lots of experience running a UK fund in a similar way. We think his experience and track record bode well for this global fund, although there’s no guarantee to how it’ll perform.

James Thomson invests in companies around the world he thinks have the best long-term growth prospects.

The manager likes to look off the beaten track to find companies he thinks will grow over the long term. This means he sometimes invests in smaller companies, which adds risk. But he also invests in a lot of companies well-known for their growth prospects. Large US technology firms, including Amazon, Adobe and Paypal, currently make up some of the fund’s top 10 investments.

The fund’s beaten the benchmark over the past 12 months. Over the long-term too Thomson’s done better than the broader global stock market. We highly rate his skills at picking companies for their long-term growth potential, though there’s no guarantee of future performance.

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 Germany and France. 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 dampen performance. We think it’s an excellent low-cost option for investing in a very broad range of global companies.

Douglas Brodie thinks the best investment opportunities can be found in smaller companies from developed economies around the world.

The manager doesn’t invest in the usual big-name companies. He invests in lesser-known smaller ones as that’s where he thinks the best growth is. Investing in smaller companies is also riskier. Most of the companies are US-based, with a fair amount also from the UK and Japan.

One of the fund’s biggest holdings is Ocado, the British online supermarket. In the past 12 months it’s grown 128.7%, which has helped the fund do much better than the benchmark over the year. As ever, past performance isn’t a guide to future performance.

At the moment the fund isn’t on the Wealth 50. If Brodie keeps doing as well as he has done over the past few years the fund will be one for our consideration.

Nick Mustoe taps into the best ideas from the Invesco Global Equity Group. He selects companies based on how much he thinks they’ll grow.

When it comes to investing, the manager likes to stay flexible. He doesn’t follow an investment style or look for a particular type of company. He’s focused purely on the growth prospects of a company. He can use derivatives to try and boost performance, but this also adds risk. More of the portfolio’s companies are currently based in the US than any other country, although the investment team thinks the best opportunities are now in Europe.

The fund hasn’t done as well as the broad global stock market under the current team. We prefer managers with a more successful and longer track record, so it doesn’t feature on the Wealth 50.

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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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