Investors looking to diversify their portfolios by spreading allocations across different regions could find some appealing funds in the IA Global sector.
Over the past five years, the IA Global sector had the sixth highest average return of all 57 Investment Association peer groups, up 54.4%.
Although it dropped down to 20th place in the past year, the 1% loss it made over the period is more modest than some of the regional specific sectors.
Diversification can certainly be found in the sector, but with 515 funds available, investors may not know where to begin, but alpha, the measurement of a fund’s returns above its benchmark, can be a good starting point.
Here, Trustnet has filtered down the IA Global funds with top decile alpha, information ratios and total return compared with the MSCI World index over the past five years - but with a below average ongoing charges figure (OCF) for those investors keeping an eye on costs.
The cheapest fund to meet the above criteria was the L&G Global 100 Index Trust, which had an OCF of 0.14%.
This passive fund tracks the performance of the S&P Global 100 index and was up 94.6% over the past five years. It also was the only portfolio on the list to make a positive return this year at 1.4%.
Inventors typically seek to outperform the market by allowing a manager to actively pick a selection of stocks, but the L&G tracker has delivered top quartile returns on a one-, three-, five- and 10-year view through passively investing, and at a fraction of the cost.
Total return of fund vs sector over 5yrs
Source: FE Analytics
However, investors could have found even higher returns over the period at below average fees from the Baillie Gifford Positive Change fund.
This £2.7bn portfolio, run by FE fundinfo Alpha Managers Kate Fox and Lee Qian, was up 147.4% over the past five years, beating its peer group by 92.5 percentage points and serving the highest alpha on the list of 6.99.
Long-term performance may have been strong, but it was the second biggest loser since the start of the year, dropping 17.9%.
The only other fund on the list to drop further was Baillie Gifford Long Term Global Growth Investment, which has fallen 28.2% so far in 2022 after returning 113% over the past five years.
It was the second-best performer over the period, charging investors a slightly higher (but still well below average) OCF of 0.64%.
Baillie Gifford’s funds stormed ahead of IA Global sector for a long time due to their large-cap growth bias, but this has equally led to their underperformance this year as high inflation and tightening monetary policy point markets towards value.
Total return of funds vs sector over 5yrs
Source: FE Analytics
In terms of information ratio, the Schroder Global Sustainable Growth fund performed the best over the period with a score of 0.54.
It was up 94.1% over the past five years and performed better than the average IA Global fund so far this year despite falling 4.3%.
That being said, its OCF was on the higher end of the list at 0.84%, whereas Schroder Global Equity had a smaller fee of 0.52%.
Total return of funds vs sector over 5yrs
Source: FE Analytics
At a cost of 0.85%, the Janus Henderson Global Sustainable Equity and Liontrust Sustainable Future Global Growth funds were the most expensive funds to make it onto the list, while still charging less than the sector average.
The two environmental, social and governance (ESG) funds were up 91.8% and 84.9% respectively over the past five years.
Both were within the sector’s top 10% for alpha, information ratio and total return over the period, but investors could have found higher performance from some of the cheaper funds in the sector.
Total return of funds vs sector over 5yrs
Source: FE Analytics
Even the lowest returner on the list, BNY Mellon Long Term Global Equity, soared 19.3 percentage points ahead its peer group over the past five years, climbing 74.3% with and alpha score of 1.31.