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.
If risks in stock markets are rising, it has not been enough to discourage fund investors who ploughed into global funds at a record rate in the first half of 2021.
New sales data from EPFR, the data firm, quoted in the Financial Times today has shown a net $580bn flowing into global funds in the first six months of the year, putting them on track to take in more in 2021 than in the previous 20 years combined.
The rush has helped pushed the market higher this year, with the FT recording that the S&P 500 is up more than 15% so far in 2021 with the FTSE All World index up more than 12%. Please remember past performance is not a reliable indicator to future returns.
The latest threat to the positive mood has been inflation, and in particular the raised chances that central banks will remove supportive monetary policy sooner than expected. Last month the Federal Reserve in the US spooked markets when a growing number of rate-setters saw interest rates rising sooner and, while those losses proved short-term, sentiment could be tested again this week when the minutes of that meeting are released.
The market had been expecting no change in US rates policy until 2024, but last month’s meeting opened the door to two rate increases in 2023. Any further confirmation in the minutes of that more hawkish tone is likely to test investors’ mettle again.
For now, however, the mood remains positive and investors seem determined to ride the next phase of the bull market. The fact that it has been global funds that have seen the most new money suggests enthusiasm for equities is broad-based, with investors seemingly unfussy about where they believe returns will come from.
Part of that story is the limited options that investors have for returns from other assets. Yields on government bonds have risen for periods this year but remain low by historical standards, pushing many investors back towards the stock market. And while the more ‘cyclical’ areas of the stock market - those companies which stand to gain most when economic growth and inflation are picking up - have been enjoying a better run in the past 8 months since the news that Covid-19 vaccines were on their way, the latest rush into funds has been once again into growth stocks, and in particular technology companies, according to the EPFR data.
Our Select 50 list of favourite funds includes several that invest globally. You can find the full list of global funds here, but here’s two funds which play into the theme of global, growth focused companies.
This Fidelity Global Dividend Fund is managed by Dan Roberts and is a global fund with a focus on companies paying a reliable dividend. That puts it in the sweet-spot for many investor looking for broad stock market exposure with the added ballast of shareholder payments.
The Rathbone Global Opportunities Fund, meanwhile, is managed by James Thomson and has performed well by investing in, among others, leading global technology companies.
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. Select 50 is not a personal recommendation to buy or sell a fund. 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 a Fidelity adviser or an authorised financial adviser of your choice.
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