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Global stock market and funds sector review – light at the end of the tunnel?

As the global economy continues to wrestle with Covid-19, we take a look at how global funds have coped and how different regions around the globe have performed.

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.

The start of 2021 has been a lot like last year in many ways – eventful. While it might be a new year, we certainly aren’t out of the woods yet. Rising infections and lockdown restrictions continue to hamper regions around the world, with Europe recently suffering another wave. But there’s light at the end of the tunnel as the global effort to vaccinate continues.

In this quarterly review, we take a closer look at what’s been driving markets, where in the world has done well and how global funds have performed.

This article isn’t personal advice. If you’re not sure whether an investment is right for you, please ask for financial advice.

The road to recovery

Since our last review, the global effort to vaccinate has come a long way. Ten vaccines have now been approved in at least one country with lots more still at various trial stages. So far, over 650 million doses have been injected around the globe with countries like the UK and US making good progress.

While positive news, there’s still a long way to go. Several European countries have temporarily suspended the Oxford/AstraZeneca vaccine following reports of possible side-effects. With such large demand, it’s also no surprise that supply issues have crept in already.

After one of the largest declines in GDP (Gross Domestic Product) since World War Two, the health of the global economy is certainly more encouraging than it was. Future growth prospects have improved with above average growth forecasts for at least the next two years. Most economies are now predicted to recover to pre-virus output levels by the end of 2022.

But it’s not only the vaccine that’s been helping. Governments and central banks have provided unprecedented levels of financial support to combat the numerous economic shocks. And this much needed lifeline looks set to stay for some time.

How have global markets performed?

Global stock markets haven’t taken their foot off the pedal since our last review three months ago. Performance has largely been positive. That said, investors in the global sector should be all too familiar with increased levels of volatility by now and this momentum isn’t guaranteed to continue.

Over the past 12 months, the FTSE World Index has returned 39.9%*. Smaller companies have continued to lead the global recovery, outperforming their larger peers by 24.5% over this period. While encouraging, there’s been a stark contrast between different regions around the globe. Smaller companies are also higher risk and more volatile.

Graph showing FTSE regional indices - annual performance (31 March 2020 – 31 March 2021)

Scroll across to see the full chart.

Past performance is not a guide to the future. Source: * Lipper IM to 31/03/2021.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
FTSE All-Share 22.0% 1.2% 6.4% -18.5% 26.7%
FTSE Asia Pacific ex Japan 36.8% 6.0% 4.0% -11.2% 44.8%
FTSE Emerging 35.6% 8.8% 1.9% -13.0% 40.8%
FTSE Europe ex UK 28.5% 4.3% 2.8% -8.0% 34.9%
FTSE Global Small Cap 34.8% 2.9% 6.6% -18.0% 62.0%
FTSE Japan 32.8% 7.5% -0.9% -2.1% 26.3%
FTSE USA 35.2% 1.8% 17.7% -2.3% 42.7%
FTSE World 32.9% 2.6% 11.1% -6.0% 39.9%

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2021.

The best performing region was Asia Pacific ex Japan which grew by 44.8% – a reflection of their effective handling of the virus. Sector-wise, technology has been one of the standout performers. Stay-at-home stocks and digital marketplaces have been some of the major beneficiaries. This region offers investors access to some of the world’s best, including TSMC (Taiwan Semiconductor Manufacturing Company), Korea’s Samsung Electronics, and Chinese internet platforms Alibaba and Tencent.

The US stock market grew by an impressive 42.7%. Performance has broadened out since the vaccine announcements were made last November as investors turned to different parts of the market for growth. Sectors like airlines, energy and banks all had a painful start to 2020 but have since started to recover lost ground.

After an impressive year of growth, it’s hard not to think about technology stocks when talking about the US. But it’s been a turbulent first quarter with some of last year’s best performers experiencing hefty falls. Growing inflation expectations were the main culprit, sparking fears of higher interest rates and increased borrowing costs.

Rising inflation tends to lead to higher interest rates which can be harmful for stocks with greater growth expectations. That’s because the present value of their future profits is worth less today.

China’s year of the Ox has got off to a nervy start, finishing the quarter down. The Chinese economy has recovered quicker than others. But with growth rates now back to pre-pandemic levels, there are concerns that stimulus will be tapered, slowing growth down.

Inflation tends to be better for value stocks. That’s because profits now are worth more than profits in the future. So the readily available cash flows of these businesses can look attractive, especially as they often trade at a discount to their true value.

The UK’s home to many of these out-of-favour companies and has been one of the strongest performing markets since the start of the year. With more certainty around Brexit and an effective vaccine programme, lots of forecasters, including the Bank of England, have recently improved their growth forecasts.

In contrast, Europe has been one of the weaker markets in the first quarter of 2021, although it’s still delivered positive returns. Pressure’s been mounting on the region with the World Health Organization (WHO) describing their vaccine rollout as "unacceptably slow". New lockdown restrictions have come into place across the continent including France, Italy and Germany.

How have global funds performed?

For more details on each fund and its risks, please see the links to their factsheets and key investor information below. Remember past performance is not a guide to the future. Investments will rise and fall in value, so you could get back less than you invest.

The IA Global sector has grown 40.5% over the past 12 months, meaning the average global fund outperformed the FTSE World’s gain of 39.9%.

Baillie Gifford funds continue to dominate performance in the global sector with three of their funds sitting among the top five best performers over the past 12 months. That said, the start of the year has been tough for growth investors, with performance across much of Baillie Gifford’s global range retreating from last year’s highs.

The top performer was Baillie Gifford Global Stewardship which returned an impressive 82%. The fund has eight named managers which come from across the different regional teams at Baillie Gifford. They look for sustainable growth businesses and look to integrate Environmental, Social and Governance (ESG) considerations. A big US bias and large weightings to stay-at-home stocks like Netflix, Amazon and Wayfair have boosted returns.

While growth-style investing has done well in recent years compared to value investing, we think a well-diversified portfolio should include a variety of styles. Investors should remember that different investment styles come in and out of favour, as well as different asset classes and geographies.

First Sentier Global Listed Infrastructure returned 11.7%, making it the weakest performer. The fund’s managed by Peter Meany and Andrew Greenup who look to invest in high quality companies they think are mispriced or undervalued. Performance can look quite different to the sector average. That’s because of their specialist focus on infrastructure which can mean they invest far more in sectors like utilities.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
Baillie Gifford Global Stewardship 39.9% 15.9% 9.9% 2.1% 82.0%
First Sentier Global Listed Infrastructure 27.6% -9.2% 19.7% -6.2% 11.7%
IA Global 29.5% 2.9% 8.9% -6.2% 40.5%

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2021.

Find out more about Baillie Gifford Global Stewardship including charges

Baillie Gifford Global Stewardship Key investor information


Find out more First Sentier Global Listed Infrastructure including charges

First Sentier Global Listed Infrastructure Key investor information

What have the research team been doing?

We’ve been busy over the past three months speaking with fund managers investing around the globe.

James Dow, co-manager of Baillie Gifford Global Income Growth, reflected on what was a challenging year for income investors. To find opportunities, the managers focus on bottom-up analysis (looking at individual company prospects) using a combination of quantitative and qualitative factors. Their search for high quality, resilient business models appeared to have paid off with lots of their holdings raising dividends and only a handful cutting or suspending them.

We caught up with James Thomson, the lead manager of Rathbone Global Opportunities. Thomson called 2020 the most important moment in the fund’s history. The global stock market decline onset by Covid-19 presented what felt like the best buying opportunity of a lifetime for Thomson.

We spoke also with Daniel Roberts, manager of Fidelity Global Dividend. His approach focuses on individual company analysis, paying close attention to their financial accounts to make sure the company dividends are sustainable. He also assesses how a company’s fared during different market conditions, looking to find resilience and more reliable revenue.

Last year several of the fund’s holdings saw double digit dividend growth, including some special (one-off) dividends paid by the likes of US Insurer Progressive. While not immune to dividend cuts or suspensions, they only accounted for less than 10% of the portfolio.

Find out more about Baillie Gifford Global Income Growth including charges

Baillie Gifford Global Income Growth Key investor information


Find out more about Rathbone Global Opportunities including charges

Rathbone Global Opportunities Key investor information


Find out more about Fidelity Global Dividend including charges

Fidelity Global Dividend Key investor information

How have our Wealth Shortlist funds performed?

ASI Global Smaller Companies was the best performing Global Wealth Shortlist fund over the past year, returning 59.5% versus 40.5% for the IA Global sector. Managed by Harry Nimmo and Kirsty Desson, this fund invests in smaller companies with the potential to deliver long-term capital growth. Their focus on quality leads them to companies with strong balance sheets and good management teams while avoiding those with lots of debt or loss making.

Jupiter Global Value Equity was previously a weaker performer. However, over the past 12 months it’s returned an impressive 46.1%. Ben Whitmore and Dermot Murphy look for companies whose share prices, in their opinion, don’t reflect their true worth, so can be bought at an attractive price. This investment style is known as ‘value’ investing and has been out of favour for several years, as the market has generally rewarded companies focused on growth. Since the vaccine announcements were made in November last year, this trend has started to shift. Value stocks have benefited from the prospect of economies around the globe being able to start re-opening.

This has also been the case for Artemis Global Income which delivered 46.7% compared to the 32.3% IA Global Equity Income sector average. Jacob de Tusch-Lec takes a contrarian approach and isn’t afraid to invest in areas that others might avoid. The fund's mix of different sized companies and value-focused approach means it often performs quite differently than others in the Global Equity Income sector. The fund’s tended to perform better than its peers in rising markets, but not as well when they’ve fallen, although this isn’t guaranteed.

Trojan Global Income was the weakest performing fund on the shortlist, returning 12.4%. The manager James Harries adopts a similar investment approach to other Troy fund managers. He looks for large, financially sound companies that have shown their resilience through both good and bad times for the wider economy. He sets the bar high when it comes to picking stocks and only those of the highest quality are considered. We expect the fund to lag the peer group when markets are rising quickly and not owning companies that are highly sensitive to how the economy’s doing has hindered short-term performance.

Investing in funds isn't right for everyone. Investors should only invest if the fund's objectives are aligned with their own, and there's a specific need for the type of investment being made. Investors should understand the specific risks of a fund before they invest, and make sure any new investment forms part of a diversified portfolio.

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
ASI Global Smaller Companies 32.1% 18.6% 3.7% -12.2% 59.5%
Jupiter Global Value Equity n/a n/a -0.7% -17.9% 46.1%
IA Global 29.5% 2.9% 8.9% -6.2% 40.5%

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2021.

N/A = performance data for this time period is not available.

Find out more about ASI Global Smaller Companies including charges

ASI Global Smaller Companies Key investor information


Find out more about Jupiter Global Value Equity including charges

Jupiter Global Value Equity Key investor information

Annual percentage growth
Mar 16 -
Mar 17
Mar 17 -
Mar 18
Mar 18 -
Mar 19
Mar 19 -
Mar 20
Mar 20 -
Mar 21
Artemis Global Income 30.5% -1.3% -0.6% -18.1% 46.7%
Trojan Global Income n/a -4.1% 18.3% 2.1% 12.4%
IA Global Equity Income 26.7% -1.1% 8.4% -9.6% 32.3%

Past performance is not a guide to the future. Source: Lipper IM to 31/03/2021.

Find out more about Artemis Global Income including charges

Artemis Global Income 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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