The global equity fund invests in primary and secondary businesses that are considered to be the foundations of the world’s economy.
FE Alpha Manager Graham French seeks out companies that are exposed to structural themes such as the growing wealth of middle classes in emerging markets or the impending shortage of resources across the globe. In addition, the manager has a bias to asset-rich companies, which are less sensitive to the economic environment.
The fund invests in industries related to fundamental growth areas such as infrastructure, agriculture and energy but also has holdings in businesses that produce consumer staples such as nappies, toothpaste and food ingredients.
The fund is highly diversified with an even distribution of assets across all of the world’s regions. This has the effect of smoothing currency fluctuations.
Launched in November 2000 the fund now holds more than £6bn in assets under management.
Performance of fund vs sector over 10-yrs
Source: FE Analytics
In terms of performance, the fund has more than tripled investors’ money over the last decade, putting it in the top-decile over the period. It is also a top-quartile performer over three and five years.
The IFA's view
"Global Basics is a fund we’ve used for some time," said Patrick Connolly, head of communications at AWD Chase de Vere. "It has a strong track record over the long-term and benefits from having had the same manager at the helm since launch."
"It invests in western companies that are trying to benefit from emerging market growth and while this is an exciting story, there is a risk that the commodity exposure can lead to high levels of volatility in the short-term."
Alternatives
M&G Global Basics used to be heavily exposed to commodities but its emphasis on the emerging markets consumer growth story means that investors may want to look elsewhere for a more focused commodities play.
JPM Natural Resources fits the bill here. Managed by Neil Gregson, the fund focuses exclusively on companies engaged in the production or marketing of commodities. Our data shows that it has returned more than 500 per cent over the last decade but investors must be aware of its exposure to unpredictable fluctuations in the prices of resources.
FE Alpha Manager Amit Lodha’s Fidelity Global Industrials fund is another that has performed strongly in the global sector. Like JPM Natural Resources, it has a higher exposure to basic materials than French’s fund and a much lower weighting to consumer staples.
Verdict
Volatility in the global commodity market means that M&G Global Basics is probably not suitable for people with short investment horizons. However, the strategy has been proven to work over the long-term and French is well-positioned to take advantage of compelling and unavoidable global structural themes.