The US is the world’s largest stock market but it looks a bit pricey, and the jury is still out on whether Trump’s administration will bring growth and prosperity or uncertainty and volatility? Brexit clouds hang over the UK which has hurt the pound, yet Britain is home to international companies benefiting from the slump in sterling. Emerging markets face increasingly divergent destinies. Meanwhile Europe looks like good value but political uncertainty looms large.
So how do you choose? Well, what if you didn’t have to. None of us know with any certainty which economies will provide the best returns over time, so it makes sense to spread your investments across a number of different geographical regions. Remember that old story about eggs and baskets? Well, a global equity fund does this for you.
If you’re wondering about the merits of this approach, you don’t need to look much further than the Fidelity Global Special Situations Fund, managed by Jeremy Podger. Podger is a veteran when it comes to global investing and has recently completed five successful years managing the fund. Over his tenure, the fund has delivered cumulative returns of 122.5% outperforming the MSCI All Country World Index by 31.5%. Please remember past performance is not a reliable indicator of future returns.
Podger admits that the fund has benefited from being in “the right areas at roughly the right time.” Of course, you may question whether the fund will achieve the same stellar performance going forward. There are never any guarantees, but it’s worth looking at the robust framework which this manager uses to invest.
When he’s deciding on what companies to hold within the fund the manager looks at three key factors: corporate change, exceptional value and unique business. Any holding going into the fund needs to tick one of these boxes. Consequently, he ends up with a good mix of investments across the world. Of course, diversification is not just about holding a spread of investments across different regions - sector and style diversification is equally important.
Podger admits that regionally, the fund does not differ very much from its benchmark, the MSCI AC World index, however, in terms of the fund’s exposure to different sectors, there’s a marked difference. He has invested heavily in three key sectors: technology, consumer discretionary (especially media) and healthcare, which have all enjoyed significant growth and been the strongest performers over the past five years.
The final area of diversification which this global fund offers is a good mix between so-called ‘growth’ stocks (companies with high expected profit growth, regardless of valuation) and ‘value’ stocks (cheaply rated, regardless of expected earnings growth).
With the wrath of the financial crisis burnt into memory, investors for very long preferred to play it safe, choosing to invest in growth stocks because of their ‘port in the storm’ characteristics while steering clear of out of favour sectors and stocks. In a low growth world, it followed that stocks offering growth would be in vogue.
But times are changing. Inflation is rising and the low interest rate environment which has persisted for so long is also likely to change, albeit gradually. This has already seen a rotation into value stocks like financials which benefit from rising interest rates. Helpfully, Fidelity Global Special Situations Fund’s unique investment framework means this fund benefits from stylistic flexibility. This has enabled the fund to deliver good performance, not just when ‘growth’ opportunities appealed most but also more recently when value stocks rebounded strongly.
Of course, the Fidelity Global Special Situations Fund isn’t the only global equity fund out there. On our Select 50 List of funds highly rated by our experts, we have a number, namely the Rathbone Global Opportunities Fund, the Invesco Perpetual Global Equity Income Fund and the BNY Mellon Long Term Global Equity Fund, all solid performers.
Past performance is not a reliable indicator of future returns
See our Select 50 recommended fund list.
Source: Morningstar, as at 23.3.12 to 23.3.17. Basis: bid-bid, income reinvested in GBP. The fund’s primary share class according to the IA is shown.
Maike Currie is an investment director at Fidelity International and the author of The Search for Income – an investor’s guide to income-paying investments. She acts as a spokesperson and commentator on investments and consumer finance with a special focus on income, interest rates and inflation. Prior to joining Fidelity, Maike worked as a financial journalist across a number of titles in the Financial Times Group. She continues to write a regular column for the FT.
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The value of investments and the income from them can go down as well as up so may not get back the amount invested. When investing in overseas markets, changes in currency exchange rates may affect the value of your investment. The Select 50 is not a recommendation to buy or sell a fund. This information does not constitute investment advice and should not be used as the basis for any investment decision nor should it be treated as a recommendation for any investment. Investors should also note that the views expressed may no longer be current and may have already been acted upon by Fidelity. Fidelity Personal Investing does not give personal recommendations. If you are unsure about the suitability of an investment, you should speak to an authorised financial adviser.