The past couple of years have been extremely differentiated in markets, as 2019 started with a strong run in risk assets while the opening months of 2020 saw the coronavirus crisis take its toll on the global economy. 
Over the opening months of 2020, we witnessed one of the worst financial crashes in history as the coronavirus pandemic took hold. This was followed by massive amounts of monetary and fiscal stimulus, which led to a sharp rally – with some markets now back to pre-coronavirus levels.
The first months of 2019 were very different with the market rallying after with the US Federal Reserve’s backpedalled on its tightening plans, despite concerns over the US-China trade war and a fractured UK in the middle of its debate on Brexit. Unknowingly at the time, was entering its final year of a decade-long bull run.
With these two very different sets of market conditions to navigate, Trustnet looks at which global funds managed to make top-decile returns in the first six months of both years.
Source: FE Analytics
All in, 20 funds from the IA Global, IA Global Equity Income and IA Global Emerging Markets sectors achieved top-decile returns over both time frames.
Of these, the best performer in 2020’s first six months was Douglas Brodie’s £1.3bn Baillie Gifford Global Discovery fund, which made 35.9 per cent. This was the second highest return in the IA Global sector over this time frame and followed on from 23.47 per cent in 2019’s opening half.
The fund focuses on global small companies, which means it can be a riskier option than other global equity strategies – although it has a track record of outperformance. That said, it has fallen harder than the market in some challenging conditions, like the fourth quarter of 2018, but held up 2020’s sell-off because of a technology disrupters and biotech stocks.
The FE Investments team, which has Baillie Gifford Global Discovery on its Approved List, said: “Baillie Gifford has a well-established growth-orientated investment process that is replicated across many of its equity strategies. The team’s consistency and focus on the long term is a valuable trait when investing in smaller companies.
“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. For this fund to be held effectively, investors must be willing to tolerate the periods when the team’s style of investing – or equities in general – is out of favour.”
The team-managed Baillie Gifford Global Stewardship fund is the second fund to be top-decile in both 2019 and 2020’s first halves. It is up 33 per cent this year and made 25.45 per cent in the same period of 2019.
Baillie Gifford said the fund aims to invest “in support of a successful, sustainable society”. It added: “We seek long-term growth through responsible businesses and we seek to engage with those businesses to enhance their positive contribution over time.”
Top holdings include the likes of Amazon.com, Tesla and Shopify, which have performed well in 2020.
Performance of funds vs sector over 3yrs
Source: FE Analytics
Andrew Dalrymple’s £62m Aubrey Global Conviction fund is next on the list of global funds that were top-decile in both H1 2019 and 2020. Dalrymple also manages five FE fundinfo Crown-rated Aubrey Global Emerging Markets Opportunities fund, which was top decile in the IA Global Emerging Markets sector in H1 2019 and 2020; it was the best emerging markets fund on the above list in H1 2020.
Dalrymple runs Aubrey Global Conviction with regard to the benchmark in terms of sector, country or particular weightings, focusing on 25-30 companies that are exhibiting high earnings and are competitive businesses.
In his emerging market fund, the manager invests in companies of at least $500m market cap that are benefitting from economic development in the consumption and services sectors, using a ‘Wealth Cycle’ investment philosophy to analyse the steps that a country is making to reach economic maturity.
The focus on consumption has been the biggest drive to the fund’s 2020 outperformance, according to Dalrymple, because these sectors are “far less cyclical than almost every other area of the emerging markets universe, containing huge growth opportunities, which also tend to exhibit defensive characteristics in troubled times”.
Going onto the top performing IA Global Equity Income funds and only two funds had top decile returns in both timeframes: Liontrust Global Dividend and Morgan Stanley Global Brands Equity Income.
The Liontrust Global Dividend fund, formerly known as Neptune Global Income, was taken over by manager Storm Uru in 2017. He invests in what he calls ‘global leaders’ or companies with a sustainable economic moat that are able to reinvest back into the business to generate returns and cash for shareholders.
When he took over the fund, Uru carried out a complete overhaul to align it with his investment philosophy: the belief that simple, great businesses can outperform average companies.
The second fund, £46.2m Morgan Stanley Global Brands Equity Income fund, is run by a nine strong investment team, including FE fundinfo Alpha Manager William Lock.
Investing in companies whose success is rooted in “intangible assets”, such as brand names and copyright, the management team said that in 2020 going overweight in technology and healthcare has had “the greatest positive impact on performance”.
While the world and global market go through “unprecedented times”, the management team said that “fortunately, Global Brands Equity Income is far higher quality than the market”, demonstrated from the lack of downside participation in 2020’s first quarter.
And finally the IA Global Emerging Market sector where five funds were top decile in both years’ first halves: AB Emerging Markets Growth Portfolio, Aubrey Global Emerging Markets Opportunities, JPM Emerging Markets, Quilter Investors Emerging Markets Equity Growth and Threadneedle Global Emerging Market Equity.
Aubrey Global Emerging Markets Opportunities, which was mentioned above, was the best performer of these five over the first six months if 2020.