Cash in on global growth

Published by Fiona Hamilton on 02 November 2009.
Last updated on 25 August 2011


The British economy faces more than its fair share of difficulties. This does not necessarily condemn the UK stockmarket, as the Footsie includes a lot of companies with international or non-UK businesses.

However, it should encourage investors to include a significant international content in their fund portfolios.

The most trouble-free way to achieve this is through a Global Growth fund, as these should offer a well-diversified spread. However, there is a big gap between the best and worst in the sector, with returns over the last five years ranging from 101% to 4%.

It is therefore vital to pick carefully. Those who prefer relatively steady progress should pick a fund with a high Lipper Capital Preservation (CP) score because it is likely to be less volatile.
CF Odey Opus fund scores the maximum five (the leader) for capital preservation. It also boasts some of the best one, three and five years' returns in the sector, and has appreciated by a stunning 165% since its 2001 launch.

The catch is the minimum investment is £5,000 and the initial charge is a whopping 7.5%. Despite this, investors may consider it is worth paying to access the highly regarded skills of Crispin Odey, the manager of the fund.

He had around 30% of the Opus Fund in cash last February, when the outlook was particularly murky, but by mid-March he had reinvested. Quite a bit of it went into UK banks and life insurers, which he had been avoiding for two years, and this has proved highly rewarding.

"I wondered how the government was going to avoid nationalising the banks. It had to be by making them profitable, so I got back in quite early," he explains.

The portfolio of M&G Global Basics is also dominated by companies listed in the US, UK and France, which is surprising given that its manager Graham French is a huge believer in the growing importance of the emerging economies.

However, he thinks it is safer to gain exposure to them through old world companies which supply their basic needs rather than by investing in them directly.

"The world is bigger than the UK, and the dominating economies will be China, Russia and India. So we invest in companies which produce the basic products that those three billion people will need and want over the next decade," he says.
French also claims to invest in asset-rich companies, which can grow independently of the economic environment, and believes the underlying economic situation has improved dramatically this year.

Invesco Perpetual is also positive about the global investment outlook, particularly in the developing world, where its exposure ranges from companies in construction and infrastructure to those supplying nappies and shoes.
Its largest global fund is Invesco Perpetual International Equity, but its most successful has been Invesco Perpetual Global Smaller Companies. In both cases Invesco Perpetual's asset allocation committee decides their regional weightings, and the specialists then pick their favourite shares.

Invesco Perpetual's head of international products, Nick Hamilton, says the International Equity fund did badly in the US over several years, and in the UK in 2008, but both sub-sectors are doing much better under new managers.
Smaller companies tend to outperform larger ones over the long run, but are seen as more volatile. This is reflected in Invesco Perpetual Smaller Companies' lower Lipper CP rating.

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