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Global funds quarterly review – what's done well in 2020?

After an eventful 2020, we look at where in the world’s done well, how Global funds have coped with coronavirus and share our outlook for the future.

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

Coronavirus, Brexit and US elections – there’s no doubting 2020 was an eventful year. And as we enter the start of 2021, we still face some challenges. Companies and economies across the world continue to wrestle with the effects of the pandemic.

While the disruption caused by Covid-19 has left some industries deeply impacted, for others like technology, the crisis has presented a great opportunity. New champions of innovation have emerged, as businesses around the world were forced to adapt to the ‘new’ normal.

This separation has caused the differences of long-term performance between growth and value investing to widen further through 2020. As we begin a new year, lots of sectors will be playing catch-up. In this review, we look at where in the world’s done well, how Global funds have fared and share our outlook for the Global sector.

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

A global response

While 2020 was a tricky year, it’s not all been bad news.

Efforts to develop a coronavirus vaccine have been rewarded. In less than a year, three vaccines have received emergency regulatory approval in the UK and two in the US. The Pfizer-BioNTech announcement made November a month to remember as the markets responded to the good news. Out-of-favour value stocks soared, recording their best month since February 1991.

As well as a vaccine boost, markets responded positively to promises of stimulus to the US economy. After the $2.2tn Cares Act passed in March, a further $900bn stimulus package was approved by the US congress in December to support small businesses and the adult population.

Keeping the general public’s finances strong is important, especially in the US as it accounts for over 65% of US GDP (Gross Domestic Product). Furlough schemes have been a popular course of action, with programmes rolled out in the UK, Israel, Poland and Portugal.

Four of the world’s major central banks have expanded quantitative easing (QE) programmes by $7.8 trillion to tackle the impact of Covid-19. This is where central banks buy government debt to inject money into the market, helping to stimulate the economy. Lots of countries have also cut interest rates. The speed and scale of these responses have helped support markets and stabilise prices.

For some countries, it’s not been all doom and gloom. While global GDP fell by 4.4% in 2020, the Chinese economy expanded by 1.9%. As the nation emerged from the coronavirus crisis, exports quickly recovered and the second largest global economy climbed back to normality.

How have global markets performed?

After a turbulent start to the year, most markets ended up in a positive place at the end of 2020, apart from the UK. Despite a strong fourth quarter, the UK was disappointing in 2020. The FTSE All-share finished -9.8% down for the year, the lowest since 2008 during the global financial crisis (GFC). Certainly a year to forget for home-soil investors.

Global Performance

Past performance isn’t a guide to future returns. Source: Lipper, as at 31/12/2020.

It’s a different story for Asia and the US. Both have delivered impressive returns, and their success isn’t what we’d expect in a global pandemic. Although past performance is no indication of future returns.

The Japanese stock market also weathered the year better than most of its developed market peers. Their policies have been supportive for recovery, and the home of the 2021 Olympics looks well poised to kick on.

While it’s recovered from the lows back in March, performance in Europe has been mixed. Spain and France have detracted from the region as lockdown continues to stall any meaningful growth. Germany’s use of the ‘bazooka’ policy on the other hand, has put Europe’s economic powerhouse on track for a ‘V’ shaped recovery. Revenue compensation and grants to the self-employed are just a few of the tools deployed as national debt reaches record levels.

The standout performer has been the Nordics. While most global banks are suggesting they plan to keep rates lower for longer to prop up the economy, Norway’s toyed with the idea of a rate hike in 2022.

Since their lows in March, markets have rebounded sharply, and smaller companies have driven the recovery on the global stage. Despite only making up around 11% of the FTSE Global All Cap Index, they’ve outperformed their larger peers by 22.5% since 23 March.

The UK’s seen one of the largest re-ratings with M&A (mergers and acquisitions) activity on the rise. Emerging Markets like Brazil and India have also recovered strongly, but have been far more volatile.

Smaller companies can benefit by being able to be nimble and adapt quicker than their larger competitors. Flatter management structures, smaller teams and leaner business models help them be more flexible – and these have played to their advantage.

Remember though, just because they’ve done well in the past doesn’t mean this will continue. Smaller companies are also normally more risky.

Global outlook

The US market dominated investor returns last year, but it was largely driven by a select few companies. The FAAMG stocks – Facebook, Amazon, Apple, Microsoft, and Google –currently make up over 20% of the S&P 500 index, and have seen very strong returns. However, valuations now look stretched. More cyclical sectors (ones that rely on the economy doing well) like Financials and Energy finished the year in negative territory.

Alongside sector shifts, the strength of regional recoveries is likely to vary too. As we enter 2021, there’s mixed information from the East.

2020 was a year of growth, largely led by exports as other countries struggled to match production. Looking forward, consumers look set to play a key role. Household savings are on the up, and with an e-commerce sector three times the size of the US, increased consumption could be an unleashed source of growth.

In Europe, a €750 billion recovery fund has been established to repair and rebuild the damage inflicted by Covid-19. It’ll focus on creating a more digital and sustainable future for the region. The European Central Bank also recently announced it’ll let banks restore dividends at the start of this year, but under strict parameters.

The Brexit referendum in 2016 triggered a retreat of investor money from UK shores and has since proved frustrating for investors. With a deal now in place, some certainty has at last been restored. While the FTSE All-Share remains at depressed levels, we think it’s home to some of the best, unloved companies and valuations are compelling. Remember though, there are no guarantees.

How have Global funds performed?

2020 was mainly a good year for active managers of Global funds.

The IA Global sector has grown 15.1%* over the past 12 months, meaning the average global fund ‘s outperformed the FTSE World’s gain of 12.7%.

Baillie Gifford funds continue to lead the Global sector, with four funds featuring in the top five best performing over the year.

Baillie Gifford Long Term Global Growth was the top performing fund, returning 95.6% over the past 12 months. Mark Urquhart and Tom Slater, the fund’s managers, focus on bottom-up stock selection. Although global in nature, this strategy has a bias towards the US and Emerging Markets with weightings to large cap companies like Amazon, Tencent and Tesla. Past performance isn’t a guide to future returns.

In contrast, BNY Mellon Global Infrastructure Income was the weakest performing fund in the sector, falling by 13.4% over the year. The manager, James Lydotes, looks to generate income for investors. This tends to be found through value stocks which have had a difficult year.

Since our last review, the IA Global Equity Income sector re-entered positive territory and finished up 3.9% for the year. After spending much of the year in the red, positive vaccine news has seen a rotation into value and revived the outlook for many income-generating companies.

Annual % growth Dec 2015 – Dec 2016 Dec 2016 – Dec 2017 Dec 2017 – Dec 2018 Dec 2018 – Dec 2019 Dec 2019 – Dec 2020
Baillie Gifford Long Term Global Growth n/a n/a 3.3% 29.9% 95.6%
BNY Mellon Global Infrastructure Income n/a n/a n/a 15.5% -13.4%
FTSE World 29.6% 13.3% -3.1% 22.8% 12.7%
S&P Global Infrastructure NR 32.9% 8.8% -4.8% 20.9% -9.4%

Past performance is not a guide to the future. n/a - full year performance data unavailable. *Source: Lipper IM to 31/12/2020.


Find out more about Baillie Gifford Long Term Global Growth including charges

Baillie Gifford Long Term Global Growth key investor information


Find out more about BNY Mellon Global Infrastructure Income including charges

BNY Mellon Global Infrastructure Income key investor information

What the Research team have been doing

As 2020 drew to a close, we continued to look for great managers with strong, long-term performance potential. There are two parts to our analysis – the data-crunching quantitative side, and the in-depth qualitative side.

The Research team has been speaking with global mangers from across the style and size spectrum. We caught up with the Artemis Global Income Manager, Jacob de Tusch-Lec.

After what’s been a tough year for income, the manager’s encouraged by the companies in his portfolio. His fund is quite different to the standard global income fund and targets companies with higher dividend pay-out ratios (companies that pay out more of their earnings to shareholders). The team expect some areas to do better than others when the economy recovers and they’ve been investing more into these areas, like Europe and the US.

We also spoke to Blue Whale Growth manager, Stephen Yiu, about some of his favourite software companies. Yiu values subscription based models, used by the likes of Adobe and Autodesk. He thinks they offer good potential for generating cash and room to grow. The fund tends to have a bias towards larger, US-based companies.

Technology has been favoured by global stock pickers, offering active managers the opportunity to deliver impressive returns.

AXA Framlington Global Technology veteran, Jeremy Gleeson, also shared his thoughts on what’s been an extraordinary year for the sector, and what he expects going into 2021. He thinks ‘stay at home’ stocks could slowdown in growth as economies begin to open and there’s less reliance on companies like Zoom.

Neither Blue Whale Growth or the AXA Framlington Global Technology fund feature on the Wealth Shortlist.

Peter Hargreaves, a major shareholder in Hargreaves Lansdown plc, is a co-founder of Blue Whale.

Annual % growth Dec 2015 – Dec 2016 Dec 2016 – Dec 2017 Dec 2017 – Dec 2018 Dec 2018 – Dec 2019 Dec 2019 – Dec 2020
LF Blue Whale Growth n/a n/a 8.6% 27.6% 26.4%
AXA Framlington Global Technology 28.5% 29.8% 7.0% 33.8% 49.1%
FTSE World 29.6% 13.3% -3.1% 22.8% 12.7%
FTSE AW/Technology TR 35.3% 28.2% 1.6% 38.7% 41.7%

Past performance is not a guide to the future. n/a – full year performance data unavailable. Source: Lipper IM to 31/12/2020.


Find out more about LF Blue Whale Growth including charges

LF Blue Whale Growth key investor information


Find out more about AXA Framlington Global Technology including charges

AXA Framlington Global Technology key investor information

How have our Wealth Shortlist funds performed?

There’s a diverse selection of global funds on our Wealth Shortlist. Each of them invests differently, so we don’t expect them all to behave in the same way. It’s important for investors to build a portfolio filled with managers who have different approaches and investing styles. Doing this should better investors’ chances of performing well over the long run.

ASI Global Smaller Companies was the best performing Wealth Shortlist fund in the Global sector. It returned 32.9%* over the year. This fund’s strategy favours companies at the larger end of the small cap spectrum. Harry Nimmo and Kirsty Desson co-manage the fund and find the most investment opportunities in the US, UK and Japan. The top contributors to performance over the past 12 months were Kornit Digital, Dino Polska and Generac Holdings. Past performance is not a guide to future returns.

Jupiter Global Value Equity returned 0.0% in 2020, making it the weakest performer on our list. We would expect this fund to underperform in this environment since growth companies have continued to outperform, while value remains out-of-favour. This has hindered performance alongside its weightings to the UK market and lack of investments in the US – where valuations are high.

Ben Whitmore’s one of the most experienced managers when it comes to investing in unloved companies. We’ve kept our conviction in the fund due to a disciplined investment process and focus on financially sound companies.

Annual % growth Dec 2015 – Dec 2016 Dec 2016 – Dec 2017 Dec 2017 – Dec 2018 Dec 2018 – Dec 2019 Dec 2019 – Dec 2020
Artemis Global Income 22.5% 11.6% -12.5% 16.2% 0.4%
Fidelity Global Dividend 22.6% 6.6% 2.2% 20.5% 6.0%
Trojan Global Income n/a 8.7% -1.0% 21.0% 2.3%
IA Global Equity Income 25.0% 10.5% -5.8% 18.9% 3.5%

Past performance is not a guide to the future. n/a – full year performance data unavailable. *Source: Lipper IM to 31/12/2020.


Annual % growth Dec 2015 – Dec 2016 Dec 2016 – Dec 2017 Dec 2017 – Dec 2018 Dec 2018 – Dec 2019 Dec 2019 – Dec 2020
ASI Global Smaller Companies 25.5% 24.9% -5.5% 17.7% 32.0%
Jupiter Global Value Equity n/a n/a n/a 8.1% 0.0%
Rathbone Global Opportunities** 16.8% 20.1% -0.5% 26.1% 31.3%
FTSE World 29.6% 13.3% -3.1% 22.8% 12.7%
IA Global 24.5% 13.8% -5.6% 22.1% 14.9%

Past performance is not a guide to the future. n/a – full year performance data unavailable. *Source: Lipper IM to 31/12/2020.

**Rathbone Global Opportunities I Acc used to extend performance history.


Find out more about Artemis Global Income including charges

Artemis Global Income key investor information


Find out more about ASI Global Smaller Companies including charges

ASI Global Smaller Companies key investor information


Find out more about Fidelity Global Dividend including charges

Fidelity Global Dividend key investor information


Find out more about Jupiter Global Value Equity including charges

Jupiter Global Value Equity key investor information


Find out more about Rathbone Global Opportunities including charges

Rathbone Global Opportunities key investor information


Find out more about Trojan Global Income including charges

Trojan Global Income key investor information

What did you think of this article?

Important notes

This article isn’t personal advice. If you’re not sure whether an investment is right for you please seek advice. If you choose to invest the value of your investment will rise and fall, so you could get back less than you put in.

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