There are eight funds in the IA Global sector that have consistently displayed more manager skill than their peers over the past decade, Trustnet’s analysis of the information ratio suggests.
Investors use the information ratio to evaluate the performance of an investment portfolio. It’s a risk-adjusted measure designed to reflect the skill of a fund manager in generating excess returns relative to a benchmark.
The ratio takes the portfolio's active return (the difference between the portfolio return and the benchmark return) and divides it by the tracking error, which is the standard deviation of the active return. A higher ratio indicates a better risk-adjusted performance.
In this series, Trustnet is looking for funds that have consistently had the highest information ratios relative to the rest of their sector. We’ve already looked at the IA UK All Companies sector and here we turn our attention to the IA Global sector.
To do this, we ran the information ratio of each fund relative to its average peer over the past 10 full calendar years as well as over 2023 to date, then sorted them by quartile to see which have spent the most time at the top of the sector for this measure.
Performance of Schroder Global Sustainable Growth since start of 2013
Source: FE Analytics. Total return between 1 Jan 2013 and 31 May 2023
The Schroder Global Sustainable Growth fund, which is managed by Charles Somers and Scott MacLennan, came in first place in this research. Over the 11 periods we examined, it had a top-quartile information ratio in eight of them.
However, it must be noted that the current managers have only been in charge of the portfolio since August 2023. It had previously been run by Katherine Davidson.
The process behind the fund looks for companies that are “willing to invest for the long term, for change and to create sustainable business models”. Among its top holdings are Microsoft, Schneider Electric, Alphabet, RELX and AstraZeneca.
In a recent update on Schroder Global Sustainable Growth’s positioning, the managers said: “The outlook remains mixed, with fiscal and monetary tightening likely to dampen the ongoing recovery. We remain tilted towards quality and are focusing on stock picking. We remain conscious of inflation and interest rate risk in the portfolio and are managing our positions accordingly.”
Source: FinXL
There are only another seven IA Global funds that have spent more than half of the 11 periods examined in the top quartile for their information ratio benchmarked against the average peer – all did so in six periods.
MS INVF Global Opportunity has made the highest total return of all the funds on the above list. In fact, its 423.3% return between the start of 2013 and the end of May 2023 is the second highest in the IA Global sector.
It follows the growth style of investing, which means that it has performed strongly when this approach was in favour (which was the case for much of the past decade) but underperformed for both returns and information ratio when it struggled, such as in 2022.
Indeed, many of the funds on the above list are growth strategies – such as TRP Global Focused Growth Equity, Guinness Global Innovators and Wellington Global Quality Growth – and have made returns over 300% since the start of 2013. They all had fourth quartile information ratios in 2022, however.
Not all are growth funds, though. Jupiter Merian Global Equity has more blended approach, which builds a diversified portfolio to ensure that it is not dominated by one particular style. This helped it to avoid dropping into the bottom quartile like the funds mentioned above.