A specialist fund that focuses on three powerful trends has outperformed well-known IA Global funds such as Fundsmith Equity on a broad spread of risk and return measures in recent years, Trustnet research has found. 
In this is annual series, we review the various Investment Association (IA) sectors on 10 different metrics to identify those that have tended to outperform their peers on multiple fronts (a more detailed methodology can be seen in the box to the right).
In this article, we examine the IA Global sector – which has been one of the major destinations of investor cash in recent years.
Over the five years in question, the average IA Global fund has posted an 86.34 total return – underperforming the 91.67 per cent made by the MSCI World. In addition, the average fund’s underperformance has come with similar levels of volatility and maximum drawdown to the index.
But when we ran the numbers, the fund that has put in the best relative performance on the 10 metrics examined was Robeco Global Consumer Trends Equities.
Performance of fund vs sector and index over 5yrs to end-2020
Source: FE Analytics
The £6.7bn fund, which is managed by Jack Neele and Richard Speetjens, made 184.72 per cent of the past five years, which is the sixth highest return of the IA Global sector. It was also one of the best in the sector for metrics like alpha generation, Sharpe ratio, upside capture and downside capture.
The portfolio is built around consumer-exposed companies in both developed and emerging markets, such as leading digital platforms, media companies, online travel agencies, luxury manufacturers and strong consumer brands. Top holdings at present include Paypal, Netflix and Microsoft.
Robeco Global Consumer Trends Equities focuses on three structural growth trends in consumer spending: the ‘digital transformation of consumption’, the growth in the ‘emerging middle class’ and the increasing importance of ‘health & wellbeing’.
In a recent update, Neele and Speetjens said: “Given the uncertain future and the current backdrop of very low global interest rates, we believe investors should focus on high-quality business with valuable intangible assets, low capital intensity, high margins and superior returns on capital.
“Companies with these traits have historically delivered above-average returns while offering downside protection in volatile market environments. Firms that exhibit these characteristics are poised to deliver healthy revenue and earnings growth. We therefore expect them to continue to generate attractive long-term returns.”
Source: FE Analytics
In second place in this research with an average percentile ranking of 13.3 is the £121m Nomura American Century Concentrated Global Growth Equity fund. It has made 147.89 per cent over the past five years, with strong results for alpha and Sharpe ratio.
The fund, which is run by American Century’s Keith Creveling, Brent Puff and Ted Harlan, looks for companies that are showing accelerating growth in earnings and revenue, rather than just those with a high level of absolute growth. E-commerce companies Amazon and Alibaba, scientific and technical instruments firm Avantor and automotive technology business Aptiv are some of its top holdings.
Peter Michaelis, Simon Clements and Chris Foster’s £1.2bn Liontrust Sustainable Future Global Growth fund comes in third place with a score of 13.6 and a five-year total return of 141.65 per cent.
The process behind the fund identifies growth themes that will shape the global economy then looks for companies that benefits from these changes. The three headline themes in the portfolio (under which are a number of sub-themes) are ‘better resource efficiency’, ‘improved health’ and ‘greater safety & resilience’.
Fundsmith Equity – one of the largest funds in the business – came in fourth place in the research. Its average percentile ranking is 13.6, which is the same as the Liontrust fund, but the five-year return is slightly lower at 137.39 per cent. Manager Terry Smith looks for companies with sustainable characteristics and where growth is organic, tending to lead to companies in the consumer staples, technology and healthcare sectors.
The FE Investments team, which has Fundsmith Equity on its Approved List, said: “The areas the fund is invested in have been in high demand since the financial crisis, which is partially why the fund has returned so much in absolute terms; however, Smith’s superior stock selection can’t be denied as this has supported the fund in times when his style has been out of favour. In relative terms, the fund remains impressive, only being challenged by a few other funds with similar investment strategies.”
Source: FE Analytics
At the bottom of the research is the Guinness Global Energy fund, with an average percentile ranking of 97.6 and a loss of 21.7 per cent over the five years under consideration.
This fund – and similar specialist offerings that focus on the energy sector – have been hit hard in recent years by falls in the price of oil. Last year was particularly bad for this, with the Russia/Saudi Arabia price war pushing the cost of the commodity down at the start of 2020, before the coronavirus crisis caused a slump in demand.
Several value funds can also be seen on the list of the IA Global sector’s worst performers, reflecting the challenges that the investment style has faced in recent years as growth investing has led the market.