Using the Lipper Leaders scoring system to analyse the best-performing funds in the IA Global sector
Global equity funds have been selling well. The biggest money takers have been funds tracking global sustainable indices—that is, passive ESG funds. Given the broad coverage of the sector, even the passive funds track numerous and diverse indices, so performance varies greatly—from zero to more than 100% return.
The MSCI All Countries World Price Index lost more than a third of its value from 19 February to 23 March, before rebounding hard, and is now more than 20% higher than immediately before the fall. That’s quite a return, and you have to wonder if it’s justified by the fundamentals. But, as one of my favourite quotes (from economist John Maynard Keynes) goes, the market can remain irrational longer than you can remain solvent. That, of course, works in both directions—staying out of a market that’s rising for which you can see no good reason, or where you feel values should recover—but fail to do so.
Global equities present a huge universe of stocks from which to choose. Funds in this sector can have a small cap, equity income, or single industry bias, just as long as they are geographically diversified. The sector is, therefore, a mixed bag.
The Importance of Consistency
Looking at the top performers over three years, each member of the table below has a Lipper Leaders Consistent Return score of 5, which is the most useful of our metrics on which to focus. It isn’t just the net gain over the five-year period that’s assessed, but many sub-periods in between, addressing an investor’s desire for minimal volatility for a given return. In addition, an even spread of gains and losses is preferred to clusters of losses and gains (although obviously, you want as few losses and as many gains as possible).
The Baillie Gifford Global Stewardship fund has delivered 104.2% over three years and is an ethically managed fund, with a multi-cap growth tilt to its portfolio. That growth style may have held it back over the past quarter, as value stocks have outperformed, but more than doubling your money over three years is not to be sneezed at. About half of the portfolio is in US stocks, and major holdings include familiar new economy stocks such as e-commerce platform Shopify, Amazon, and Tesla.
In second place comes another Baillie Gifford fund—Global Discovery. These two are the only ones to have a more than 100% return over three years—the next in line, Liontrust Sustainable Future Global Growth—comes in with a still very pleasing 75.4%. Baillie Gifford Global Discovery has a mid-cap growth bias. Small and mid-cap funds tend to be more volatile, and this is no exception, sustaining the third-largest losses over the quarter (7.7%), as some of the froth has come off many of the more richly valued new economy stocks.
It is these that have powered fund returns over the past few years. The long-term case for such businesses looks robust. But (again, another Keynes attribution), in the long term we’re all dead. Whether or not investors have to wait that long to see growth make a comeback—which I doubt—global equities present many other options.
Table 1: Top-Performing Global Funds Over Three Years (with a minimum five-year history)
Source: Refinitiv Lipper. All data as of March 31, 2021; Calculations in GBP
This article was originally published in Moneyfacts (page 18)
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