12 bargain global funds

Published by Helen Pridham on 16 April 2013.
Last updated on 16 April 2013

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We all like getting good value for money. But this entails taking into account quality as well as cost.

It's the same when we choose an actively managed investment. It's not just a matter of picking the cheapest products. Performance also has to be taken into account. So when Money Observer selected the 21 actively managed funds and investment trusts we believe offer investors good value, we did not necessarily choose the cheapest products. We have selected those we believe will also deliver good returns.

For our UK picks and methodology, read: Nine bargain UK funds.

Asia Pacific

Invesco Asia Trust

Invesco Asia has an annual management charge of 0.75%. Extra expenses take the ongoing charge to a little more than 1%. The investment trust is managed by Stuart Parks and Ian Hargreaves. Both managers also run open-ended Asian investment funds.

The trust's strategy is to invest in companies likely to be the long-term beneficiaries of Asia's growing appetite for domestic consumer goods. Its top three exposures are to China, South Korea and Hong Kong, which jointly make up 62% of the portfolio. It can also invest in Australia.

First State Asia Pacific Leaders

This fund has a standard annual management charge of 1.5%. Its ongoing charge is only slightly higher, at 1.55%. It is one of the few remaining Asia Pacific funds with a long track record of good performance that is not "soft closed".

It is managed by the highly experienced Angus Tulloch and Alistair Thompson, who take a conservative approach. They invest in large and medium-sized companies, and their emphasis is on capital preservation. When deciding which companies to buy, they consider how well businesses are likely to perform in bad times as well as good to ensure any losses are minimised.


BlackRock Greater Europe Investment Trust

Most European investment trusts and some unit trusts have performance fees. One of the attractions of this trust is that its performance fee is capped.

Thus, while BlackRock receives an annual fee of 0.70% of market value plus a performance fee of 15% of any outperformance of the FTSE World Europe ex UK index, the maximum total management fee is 1.5% - although the ongoing charge may be slightly higher.

It is managed by Vincent Devlin and Sam Vecht, who can invest in a mixture of European companies of all sizes and some businesses in eastern Europe.

AXA Framlington European

AXA Framlington European has a standard 1.5% annual management charge and a relatively modest ongoing charge of 1.61%. It is managed by Mark Hargraves and has a strong performance record over all periods.

In-house research helps Hargraves spot growth themes, and he then looks for companies to exploit these themes. They must be high-quality, dynamic businesses generating a high return on invested capital. He endeavours to invest in the most attractive stage of a company's life cycle. He is a long-term investor with an average holding period of three to five years, which helps keep the portfolio's turnover low.


Law Debenture Corporation

This investment trust has an annual management charge of 0.3%. Even with additional expenses, its ongoing charge is less than 0.5%, making it one of the cheapest global growth trusts. It is unusual in that it is part of a group that provides independent fiduciary services to other companies.

The trust is particularly good as a first investment or as a one-stop-shop for UK investors, as around two-thirds of the portfolio is invested in the UK. Overseas holdings are used by its manager, James Henderson, to gain exposure to opportunities he cannot find in the UK.

Scottish Mortgage Investment Trust

Scottish Mortgage has a low annual management charge of 0.32% and an equally modest ongoing charge of 0.51%. The trust has a definite global slant and only a small exposure to the UK, currently of about 13%.

It is managed with an unconstrained approach, and it has around 70 holdings and a low turnover. The trust only invests in companies its managers think will do well - it does not simply follow an index.

The trust's long-serving manager, James Anderson, is about to take a six-month sabbatical, but we are confident his deputy, Tom Slater, will continue to manage the trust in a similar way to Anderson over this period.

Global emerging markets

Templeton Emerging Markets Investment Trust

This trust has a 1% annual management charge and ongoing charges of 1.31%. Unlike many of its counterparts, it does not charge a performance fee and - in contrast to many open-ended funds, which are facing capacity issues and have been turning investors away - it is still trading at a discount to its net asset value. Nevertheless, it has an excellent long-term performance record.

It is managed by a very experienced team led by Dr Mark Mobius, who is supported by many researchers around the world. It is well diversified and has very low portfolio turnover, which helps keep costs down.


Baillie Gifford Japan

This trust has a 1% annual management fee and an ongoing charge of 1.2%. It is not the cheapest in the sector, but it has the best long-term performance record and a very experienced fund manager in Sarah Whitely.

Whitely manages the investment trust with a bias towards medium and small companies, so she benefits from being able to take a long-term approach with her holdings. She can make use of gearing, which is currently at 14%. Whitely generally invests in companies she feels have good growth prospects over a three- to five-year period.

North America

GAM North American Growth

GAM North American has a standard 1.5% annual management charge and an ongoing charge of just 1.57%. It has an impressive track record and is managed by Gordon Grender who has more than 40 years of investment experience. He invests in the US and Canada, where he seeks out value stocks overlooked by the wider investment community.

Grender holds companies he likes for the long term. He steers clear of firms he finds hard to value, so the fund has a relatively low technology sector weighting.

The North American Income Trust

This actively managed US equity income trust has an annual management charge of 0.8% and no performance fee. It is trading at a discount to its net asset value at the time of writing.

It can invest in companies of any size in the US and Canada, although it invests primarily in larger US companies. Up to 20% of the fund can be invested in bonds. It does not have a track record, but it is managed in Aberdeen's style by Paul Atkinson, so should deliver good results.

Global equity income

Newton Global Higher Income

There is little difference in the charges of most global equity income funds. This fund has a standard 1.5% charge, but its ongoing charge is modest, at 1.63%. It has a good pedigree. Newton has a sound record in the field of equity income investing. This fund was one of the first of its type to be launched.

It has been managed since inception by James Harries, who invests in shares yielding at least 25% more than the FTSE World index. This steers him towards out-of-favour stocks and companies that must also generate sustainable free cash flow.

Securities Trust of Scotland

This trust has an annual management fee of 0.6% and an ongoing charge of just 0.76%. It dropped its performance fee a year ago, shortly after it changed its mandate from a UK to a global growth and income trust. Its managers have stated their intention to keep the ongoing charge under 1%.

At the time of the change, Alan Porter took over as lead manager, and its performance has improved since. The trust now trades on a slight premium to net asset value, but this was not excessive at the time of writing.

This feature was originally published in our sister publication Money Observer

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