Interactive Investor

Rated Funds update: Global growth and equity income

26th August 2014 17:05

Andrew Pitts from interactive investor

Global equity income: Best small fund winner

The number of global equity income funds has grown steadily in recent years. There are now three times as many funds as five years ago.

However, the newest addition to our Rated Funds list in this category is one of the longer-running products, Legg Mason Global Equity Income. This year it won our best small fund award.

It is managed by Paul Ehrlichman, who attributes its success over recent years to his contrarian value approach of tilting the portfolio towards the dividend-paying companies that are most undervalued at any point.

Meanwhile, we have put two existing Rated Funds under review. Invesco Perpetual Global Equity Income and Threadneedle Global Equity Income have both been lagging over the past six months.

Invesco Perpetual's fund still has a strong longer-term record, so its recent slide may only be a temporary phenomenon. Threadneedle Global Equity Income is also still looking good over the long term but has been flatlining recently.

Global growth: diversified core

A global growth fund is a convenient way of providing a diversified core for your portfolio and giving you exposure to the world's main stockmarkets. We have therefore decided to expand the number of Rated Funds in this category.

In addition to the three extra funds that gain inclusion as a result of their success in our annual awards, we have added another five that have caught our eye (see below).

The award-winning additions are Schroder Multi Manager International, Alliance Trust Sustainable Futures Global Growth and Law Debenture, which provide interesting alternatives to the initial list.

Schroder Multi Manager International invests in other managers' overseas equity funds, both UK and overseas domiciled. The managers of Alliance Trust Sustainable Futures Global Growth have their own "sustainability matrix" to measure how sustainable companies are and determine their eligibility for the fund.

Law Debenture was the winner of our best global trust award, despite being heavily weighted towards UK shares. However, manager James Henderson argues plenty of UK-quoted companies give exposure to the global economy.

The trust is also unusual because it owns a fiduciary services business. According to Winterflood Securities, the true value of this business helps offset the rather high premium to net asset value at which the trust's shares are currently trading.

The fund we are placing under review in this sector is Pictet Premium Brands, which invests exclusively in companies producing aspirational products and services. Its performance has lagged significantly of late. However, if global growth continues to improve, its fortunes could recover.

Expanding the choices: global growth

Ardevora Global Equity

Ardevora was set up in 2010 by successful fund managers Jeremy Lang and William Pattisson, who have all their long-term savings in their funds. Global Equity is managed by a team of four managers that includes Lang and Pattisson.

It is a 150/50 long/short fund, so it can take advantage of falling share prices as well as rising values. Its investment approach is to attempt to exploit the biases of other stockmarket participants.

The fund is invested primarily in the US and Europe.

Brunner Investment Trust

Brunner aims to provide investors with a one-stop-shop investment that offers 50/50 UK and international exposure.

As well as targeting capital growth, it seeks to provide above-inflation annual dividend growth, and has recently raised its dividend - which is paid quarterly - for the 42nd successive year.

It is managed by Lucy Macdonald and Jeremy Thomas at Allianz Global Investors.

The trust's performance has improved recently, helped by a number of factors, including a switch by its managers to a more focused approach and a shorter stock list. The trust now has around 85 holdings, compared with 100 six months ago and less than half that number in 2008.

Caledonia

Caledonia's performance has picked up after a disappointing period immediately following the arrival of Will Wyatt as manager four years ago.

Numis Securities thinks this suggests efforts to refine its investment process and strengthen the management team should support long-term performance.

The trust's portfolio is divided into four investment pools: quoted, unquoted, funds and income and growth. Its substantial exposure (34%) to unquoted assets differentiates it from other global trusts but may make it appear too risky for some investors.

Lindsell Train Global Equity

The managers of this Dublin-based fund, Michael Lindsell and Nick Train, have a strong track record. They aim to produce capital and income growth over the long term by constructing a concentrated portfolio of "exceptional" companies, with a focus on businesses with sustainable business models and/or established resonant brands. They look for companies demonstrating long-term, durable cash and profit generation.

Standard Life Investments Global Equity Unconstrained

This fund is one of several Standard Life Investments' unconstrained products. Its investment managers' primary focus is on choosing good shares rather than ensuring their portfolios reflect any kind of index weightings.

Global Equity Unconstrained has been managed by Mikhail Zverev since 2010. It holds a diverse mix of international shares. Regional, country and sector weightings are a byproduct of these stock selections.