Where do you plan to invest this year’s individual savings account (ISA) allowance? If you’re stuck for ideas then why not build a global portfolio?
The benefit of taking a truly international approach is getting exposure to multinational names as well as innovative companies that are on the rise. Our research has highlighted that many talented, successful investment managers are at the helm of funds focusing on individual countries and regions.
This is home to a phenomenal number of corporate giants, particularly tech names that have enjoyed a remarkable couple of years. This list includes the world’s two largest companies – Apple and Nvidia – which each boast market capitalisations of more than $3 trillion. The importance of the US on the global investment stage simply can’t be ignored and it also has the two largest stock markets in the world: the New York Stock Exchange (NYSE) and the NASDAQ.
One of the few funds to have regularly outperformed the S&P 500 index over long periods of time is the Brown Advisory US Flexible Equity fund. This achievement is partly due to the freedom enjoyed by its manager, Maneesh Bajaj, to select companies from across the market-cap spectrum.
Of course, it’s not all about the mega-caps. The US has a thriving smaller-cap sector and one of the funds we like in this area is T. Rowe Price US Smaller Companies Equity. This fund, which is managed by Matt Mahon, has a flexible approach that enables it to look for both growth and value opportunities in this space.
As with the US, the European region plays host to a tremendous array of companies from different sectors. Many of these leading names can be found in the Liontrust European Dynamic fund. The team behind this fund believes cash flow is the single most important determinant of shareholder return, so the portfolio is made up of companies that have strong cash-flow characteristics. We are very impressed by the rigorous process and collaborative approach that has helped contribute to stellar long-term performance.
Europe also has a bustling smaller companies sector and one of the best ways to get exposure to this area is through the Janus Henderson European Smaller Companies fund. The fund has a style-agnostic approach to investing that means managers will buy growth companies at a reasonable price, as well as considering neglected areas of the market. As they’re also willing to invest in the very smallest of companies, they can sometimes find hidden investment gems that may have been overlooked by their rivals.
There’s a strong likelihood that a UK-based investor will want some exposure to companies that are listed in their home market – and there’s plenty of choice.
One option is VT Downing Unique Opportunities, a multi-cap UK equity fund that’s managed by the very experienced Rosemary Banyard. Businesses chosen for inclusion in the portfolio will be seen as having competitive advantages that are difficult to replicate and which can create high barriers for new entrants.
If you’re after a fund that’s more focused on companies with lower market capitalisations, Unicorn UK Smaller Companies is definitely worth a look. This is a high-conviction portfolio that focuses on company fundamentals and aims to make long-term investments, while avoiding low-quality businesses that burn through cash.
Looking for something in the middle? The Rathbone UK Opportunities fund is a flexible fund targeting quality growth businesses, looking to take advantage of cheap UK valuations. Manager Alexandra Jackson joined us on the Investing on the go podcast recently and told us about two fascinating UK companies — Bloomsbury Publishing and Games Workshop.
While the US, Europe and UK are among the most favoured geographic regions for investors, there are plenty of other areas worth including in a broad global portfolio.
For example, the Schroder Asian Alpha Plus fund focuses on building a concentrated portfolio of predominantly larger companies from the Asian region. We believe Schroders’ global scale and its quality analyst team give fund managers a competitive advantage in this fast-growing area.
Japan is another market that’s worthy of consideration.
We like the Baillie Gifford Japanese fund, which is one of the oldest funds in its sector and has a track record of outstanding returns. The focus of this fund is to invest in growing Japanese businesses that deliver consistently strong returns to shareholders. Its holdings currently include Nintendo and Sony.
But what if you don’t want to pick individual country/regional funds? Well, there are plenty of global portfolios from which to choose if this is the case.
Take CT Global Focus, for example. This is a concentrated, high-conviction portfolio of best ideas that invests in high-quality business around the world. We like the fact that this is a genuine global fund that has the ability to venture into the emerging markets when it finds businesses meeting its strict quality criteria.
An alternative global fund is IFSL Evenlode Global Equity. This fund focuses on companies with high returns on capital and aims to provide capital growth over rolling five-year periods. Its performance is helped by ‘Eddie’, the in-house software system that helps teams find high-quality, cash-generative companies that are able to provide consistent outperformance.
