The likes of M&G Global Dividend and Newton Global Higher Income have combined assets under management (AUM) of more than £10bn, and have taken £3bn in the last 12 months alone.
Both funds are sector leaders, but as FE Alpha Manager David Coombs highlighted in a recent FE Trustnet interview, there are concerns that fast-growing funds may be unable to replicate the performance that made them so popular in the first place.
With this in mind, we look at some smaller global portfolios that experts are tipping for future success.
Aberdeen World Growth & Income
Bestinvest’s Jason Hollands thinks the Aberdeen World Growth & Income fund is an undiscovered gem in IMA Global Equity Income.
At just £267m, it is modestly sized compared with some of the behemoths in the sector. However, he points out that it has one of the best global equity teams in the industry behind it. "The Aberdeen fund is managed by the same team behind the incredibly successful Murray International Trust," he explained.
Bruce Stout is the lead manager of the five crown-rated Murray International IT, and one of the biggest names in the investment trust industry overall.
Performance of manager vs peers over 10yrs
Source: FE Analytics
The fact that Aberdeen’s open-ended range is team-managed means Stout’s name is not readily associated with the World Growth & Income fund, which may go some way to explaining why it is not on every investor’s radar.
Our data shows that the fund has very slightly fallen short of its benchmark since launch, with returns of 41.28 per cent.
However, it has been significantly less volatile on an annualised scale (13.5 per cent compared with 15.55 per cent), and its max drawdown is far lower (14.17 per cent compared with 18.36 per cent).
Performance of fund vs sector and index since Oct 2009
Source: FE Analytics
It is currently yielding a touch over 2 per cent, which is below average for the sector.
Like all Aberdeen portfolios, the World Growth & Income fund targets quality, cash-rich companies at the lowest possible prices.
This means it tends to outperform during falling markets, but as Stout has pointed out in a number of FE Trustnet interviews, it tends to lag behind rallies.
Stout is currently cautious in his outlook for risk assets, believing that the quantitative easing “experiment” could come back to haunt investors in the coming years.
The fund is invested predominantly in developed markets, with only 5 per cent in emerging markets.
Assets are split relatively equally between Europe, the UK and the US. Roche, Philip Morris International and British American Tobacco (BAT) are Stout’s top-10 holdings.
Aberdeen World Growth & Income requires a minimum investment of £500 and has an ongoing charges figure (OCF) of 1.66 per cent.
CF Odey Opus
"Among the more interesting global funds in my view is CF Odey Opus, an unconstrained fund managed by hedge fund godfather Crispin Odey (pictured), which has bounced back with a vengeance over the last year following a tough 2011," said Hollands.
"If you want a quasi-tracker, then this is not the fund for you. The manager takes punchy, high-conviction bets, most notably with a 7.2 per cent holding in BSkyB and a further 5.8 per cent in Sky Deutschland, both of which are listed interests of News Corporation."According to FE Analytics, the fund has comfortably beaten its MSCI World benchmark over five- and 10-year periods, but it is slightly behind over three, thanks largely to a very poor period during the summer of 2011.
Performance of fund vs sector and index over 10yrs
Source: FE Analytics
As Hollands points out, the fund is very high conviction in its approach, and it has consistently been one of the most volatile in the IMA Global sector as a result.
In spite of its strong long-term record and the calibre of manager in charge, the fund is still only £373m in size.
However, with both retail and adviser interest growing in recent years, this figure could be set to increase significantly before long.
CF Odey Opus requires a steep minimum investment, but it is available through certain platforms for a much more reasonable price. It has an OCF of 1.58 per cent.
Hargreaves Lansdown’s Richard Troue is also a fan of Odey’s fund, and likes the fact it does things differently from its rivals.
In a note to investors earlier this year, he said: "[Odey] believes the investment herd is currently obsessed by companies that provide everyday essentials."
"Many investors believe companies such as Unilever, Nestle and Proctor & Gamble are 'safe' because they provide the soaps, washing powders, toothpastes and margarine we use whether the economy is booming or struggling."
"Such stocks have performed well over the past couple of years, however Crispin Odey believes there are inherent risks as they operate in competitive markets."
"Outside of this area, Crispin Odey sees exceptional opportunities for investors who think differently. He believes there are companies investors have all but given up on that, even if they demonstrate modest growth, could see their share prices rise much higher."
"He has filled the portfolio with out-of-favour, unglamorous stocks such as BP, Barclays and BSkyB. These companies were in the news for all the wrong reasons, but he suggests a sharp price fall following a scandal or disaster can create a long-term buying opportunity."
Fundsmith Equity
Last but not least, Hollands points to Terry Smith’s Fundsmith Equity fund as a potential star of the future.
It has already attracted a huge amount in terms of inflows in less than three years, with assets under management (AUM) already rising to £1.4bn.
The vast majority of interest has come from advisers, and Hollands believes it could become a popular fixture with private investors as well.
Like CF Odey Opus, the Fundsmith Equity fund is a high-conviction portfolio, and therefore not for the faint-hearted. However, Hollands points out that Smith’s process has worked very well so far.
"The fund was launched in November 2010 by Terry Smith, chief executive of Tullet Prebon."
"Although the fund has yet to clock up a three-year record, returns so far have been strong."
Performance of fund vs sector and index since launch
Source: FE Analytics
"It is important to note however, that this is a concentrated portfolio both in terms of stocks, typically 25 to 30, and also in respect of geographic exposure, with 62 per cent of the portfolio in the US, 24 per cent in the UK and the remainder in Europe," he added.
The fund has a multi-cap focus, with top-10 positions ranging from FTSE mid caps to US multinationals. Domino’s Pizza Group, Microsoft and Unilever are all top-10 holdings.
Fundsmith Equity requires a minimum investment of £1,000 and has an OCF of 1.69 per cent.
