Important information: The value of investments and the income from them, can go down as well as up, so you may get back less than you invest.
There’s no wider remit for a fund manager than the entire world. Global investors benefit from having all conceivable markets at their fingertips, but with that opportunity set comes a range of ways to tackle it.
The benefit for investors is that, whatever global strategy they’re looking for, they’re likely to find it. Whether you’re leaning towards equities for capital growth, equity income for dividends, or bonds for diversification and fixed income exposure, chances are you’ll find a global fund manager to suit your needs. Here are a couple of examples of each, all from our Select 50, you can view the full global equity sector here or bond sector here.
Fidelity manager Jeremy Podger aims to invest in three specific types of opportunities – corporate change, exceptional value and unique businesses.
Firms in the corporate change category offer the potential for a fundamental shift in value, with catalysts linked to near-term restructuring, merger and acquisitions or spin-off activity. Exceptional value companies can deliver earnings growth in excess of market expectations, potentially leading to the market reassessing their value. Unique businesses are typically firms with a dominant industry position, strong growth, cash flow and pricing power. The three-pronged approach aims to provide diversification and exposure to growth throughout the entire market cycle.
The fund is currently positioned to benefit from the continuing progress being made in I.T. Representing this theme in the portfolio are tech leaders Microsoft, Apple and Alphabet as well as semiconductor stocks, which are potential beneficiaries of the 5G cycle, and payment service providers.
Podger is using the present market uncertainty to look for growth among cyclical companies and value among more defensive names. He explains: “I still like technology as a place to find good long-term investments, though here some names appear to be over-stretched. As ever, my focus is on stock picking. Overall, I believe that the portfolio is well positioned with a stylistic balance and provide exposure to companies that appear to offer excellent long-term value.”
Quality matters for Walter Scott & Partners, the boutique asset manager at the helm of BNY Mellon Long Term Global Equity. Owned by BNY Mellon, the firm specialises in global equities and takes a team-based approach to steering this fund.
The managers analyse companies within the portfolio by dividing their resources into three key areas – the Americas, Asia and Europe, and the Middle East and Africa (EMEA). Analysts rotate between these geographies, giving them time to develop a broader knowledge of the team’s global spread, before focusing on developing one area of expertise.
They look for companies capable of at least 20% growth over the long term, which they expect to hold forever à la Buffett. This means turnover is low, keeping trading costs to a minimum and reinforcing the message of seeking real returns over the long term for investors.
With individual stock-selection at the heart of this process, there is no bias towards a specific geography or sector – it’s simply about finding quality companies. The team’s ‘seven sisters’ guiding principles help them understand a company in terms of: its product or franchise; the industry in which it operates; its competitive position within that industry; its profitability and stability; how much control the company has over its own destiny; the quality of management; and the sustainability of the business over time.
Focusing on equity income, Fidelity Global Dividend invests in resilient businesses with an eye on capital protection as much as long-term income growth.
Manager, and former accountant, Dan Roberts places a heavy emphasis on scrutinising financial statements to ensure that companies can continue to pay their dividends through thick and thin. Roberts focuses on trying to deliver an attractive level of yield for investors but without compromising on the quality of dividends which underpin that distribution.
The manager currently expects portfolio dividends to be relatively resilient in the context of a broader market where cuts of up to 30% are expected. The portfolio has little or no exposure to areas where dividend cuts have been most significant, namely European banks, energy, aerospace, travel & leisure and real estate holdings.
While some cuts will be inevitable, the manager believes a constant focus on owning financially sound businesses should help to avoid the worst outcomes elsewhere in the market. One of the fund’s top holdings is Dove soap-owner Unilever. Roberts is attracted to the company’s distribution advantage in emerging markets, from where it generates around 60% of sales, as well as the new chief executive’s CEO commitment to achieving a 20% margin target in 2020.
In the Invesco Global Equity Income Fund, manager Stephen Anness take a ‘total return’ approach, aiming to provide investors with a blend of above average income as well as capital growth. Anness is particularly attracted to strong, cash-generative businesses, offering above average dividend yields and sustainable business models.
Stock selection begins with the fundamentals, as Anness takes a bottom-up approach. This allows him to minimise risks which often come with following broad global macro themes. Beginning with the baseline company figures means the manager can focus on what really drives company performance, opening up the opportunity to identify well-managed companies with strong business franchises and lower than average financial leverage.
Current holdings demonstrate a clear commitment to diversification, with the likes of Microsoft, pharma giant Bristol Myers-Squibb, American Express and Taiwan Semiconductor Manufacturing Co. all in the top ten names.
High yield bonds offer the potential for higher long-term returns than investment-grade bonds but this can mean dealing with higher default rates and greater volatility along the way.
The Indianapolis-based JPM Global High Yield Bond team prizes bottom-up research to minimise the chance of exposing investors to these risks, digging into companies’ financial statements and quizzing company management on their creditworthiness. If firms do default on their bonds, the managers often work with the borrower to resolve the situation.
Opportunities arise for the team when their views on creditworthiness split from those of the market. What other investors avoid may be a chance for the managers to scoop up a higher quality bond at an attractive price.
Bond veteran Ian Sims leads the team at Colchester, alongside co-founders Keith Lloyd and Kathryn Elsby. Bringing with them over 30 years’ experience each, all three managers are personally invested in the portfolio.
The trio forms part of a seven-strong collective at Colchester. Analysis is split between the team, with the aim of keeping a close eye on a blend of global aggregate, inflation-linked, and emerging-markets bond portfolios.
This strategy hones in on global sovereign bonds and currencies, including emerging markets, in particular. The team judges countries on their creditworthiness, assessing their ability to repay debt.
The fixed income analysis starts with attention to national inflation forecasts and yields on offer, in order to form a view of each country’s financial stability. These forecasts allow the team to generate distinct bond portfolios for each country.
With the screening conducted and nations separated the team allocates capital, concentrating on countries considered investment-grade, with the ability to invest up to 20% of the fund in sub-investment-grade bonds. A value approach, the strategy can result in outright contrarian plays, notably its long-term overweight position in Mexican government debt.
The resultant portfolio is a blend of bond and currency exposure, balanced by the team’s conviction in specific ideas and close consideration of risk management.
More on Fidelity Global Dividend
More on Invesco Global Equity Income
More on JPM Global High Yield
More on Colchester Global Bond
Important information: Investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. There is a risk that the issuers of bonds may not be able to repay the money they have borrowed or make interest payments. When interest rates rise, bonds may fall in value. Rising interest rates may cause the value of your investment to fall. Some of these funds use financial derivative instruments for investment purposes, which may expose the funds to a higher degree of risk and can cause investments to experience larger than average price fluctuations. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to an authorised financial adviser.