Investing in growing businesses has proved to be a consistent driver of long-term returns in the IA Global sector.
In this series, Trustnet is examining funds' rolling three-year returns of the past 10 years, calculated monthly to give 120 data points for each portfolio. This week, it’s the turn of the IA Global sector.
We found that all funds that spent more than 65% of the past 10 years in the first performance quartile of their peers for these three-year periods had a bias towards growth stocks.
The nine funds listed below emerged as the best performers in 120 overlapping cycles from 2013 till today (only including funds that had a complete track record). These results are comparable to what emerged for the IA European sector in the previous instalment of this series.
Rolling three-year returns of Guinness Global Innovators vs sector
Source: FE Analytics
The list opens with Guinness Global Innovators, which has been in the top quartile 92.5% of the time in this analysis.
Co-managed by FE fundinfo Alpha Manager Ian Mortimer and Matthew Page, this $695.6m fund is heavily skewed towards US equities, which make up 83% of the portfolio, and the telecom, media & technology sector (60.2%).
FundCalibre analysts awarded it an Elite ranking for being “of particular interest to investors who like to be at the forefront of innovation”.
The top three of the 30 holdings are Nvidia, Meta and Microsoft. However, the managers claim to look for innovation “not just in disruptive tech-driven products, but also in the intelligent application of ideas which is found in most industries and at different stages in company lifecycle”.
Outside of the US, they invest in Switzerland, France, Germany, Taiwan and China.
The fund has a 85% correlation to the second-best in the list, TRP Global Focused Growth Equity.
Source: FE Analytics
Similarly to the previous strategy, the fund has an overweight to IT stocks (6.2% more than the index) but is comparatively more geographically diversified, with 60 to 80 positions including in Japan, UK, Canada, Germany, Italy, Hong Kong, Spain and India.
The $3.2bn portfolio is run by FE fundinfo Alpha Manager David J. Eiswert.
Three Baillie Gifford funds – Global Discovery, Global Alpha Growth and International – claim a large section of the table for the growth-focused investment house.
The first of the three is FE fundinfo Alpha Manager Douglas Brodie’s £790m global smaller companies strategy, which is highlighted by FE Investments analysts despite its volatile nature.
“Exposure to high-growth technological disruptors has been the key driver of outperformance, which has been achieved with an above-average level of risk,” they said.
“Due to its volatile nature, the fund has lost more than the benchmark when sentiment towards smaller growth companies turns negative, however, although in isolation the fund is high risk, it could be well suited as an addition to an already-diverse global equity allocation that is lacking smaller company exposure.”
Behind the other two vehicles, which are 100% correlated to each other, is the manager trio Malcolm MacColl, Spencer Adair and Helen Xiong, who were praised by Square Mile analysts as “highly experienced investment professionals”.
“Baillie Gifford Global Alpha Growth is built from the best global ideas taken from the various investment teams within the organisation and the portfolio is constructed and overseen by some of the company's most senior managers,” they said.
“Although the emphasis here is very much on growing companies, in practice the portfolio is populated with a diversified range of businesses at different stages of their maturity. Furthermore, the fund's management team aims to ensure that there is also diversity with the drivers of growth and to avoid one, or a few, themes dominating the portfolio.”
Rolling three-year returns of funds vs sector
Source: FE Analytics
Just below the 70% threshold, Rathbone Global Opportunities’ concentrated portfolio is led by FE fundinfo Alpha Manager James Thomson, whose speciality is investing in companies with a plan to grow rapidly without running out of money or overstretching their resources before they are household names.
FundCalibre experts appreciate this “truly active, unconstrained growth fund” and included it in the Elite selection.
“Thomson's high conviction contrarian strategy has proven itself over many years. He is not afraid to admit his weaknesses or past errors, a refreshingly honest approach, which allows him to concentrate on his core strengths - including stock picking,” they said.
Not far behind are the two Janus Henderson Global Equity and Jupiter Merian Global Equity, which close the list.