Three global funds to strengthen your ISA or SIPP
We profile a trio of names suitable for different types of investors and times in your life
Having a broad range of assets can be very important, particularly if you are still trying to create the building blocks of your investment portfolio. Making sure they are spread across a range of geographies is equally important.
After all, it is rare that economies are performing well in every country in the world; the same applies to industries. Having exposure to lots of different areas should help to stabilise your portfolio as inevitably there will be one country or industry in your portfolio that isn’t doing so well at any given time.
There are many ways in which you can create a diversified portfolio such as buying a handful of exchange-traded funds which track various indices around the world. In this article we explore activelymanaged funds and delve into three products which give you exposure to lots of different countries, industries and even styles of businesses.
All three funds appear on AJ Bell’s favourite funds list, a selection of products chosen in conjunction with research group Square Mile because the offer a combination of the following criteria.
They have to be low cost and great value for money. The funds must have a good performance stats compared to their benchmark and peers. And finally, they must have a high quality fund management team.
We believe all three are ideal funds to strengthen your ISA or SIPP (self-invested personal pension).
HAVING EXPOSURE TO LOTS OF DIFFERENT AREAS HELP TO ST ABILISE YOUR PORTFOLIO FIRST STATE GLOBAL LISTED INFRASTRUCTURE (GB00B24HJL45) Ongoing charge: 0.82% Dividend yield: 2.5% Annualised return over 3 years: 17.8%
Infrastructure can be a really useful asset to include in your portfolio as this area generally enjoys steady cash flow, thus making it a good source of income. As such, this fund should be of particular interest to people in retirement.
One of the easiest ways to get exposure is through an investment fund. The First State product has stakes in companies such as National Grid (NG.) which is in charge of gas distribution networks; and American Tower which owns mobile phone masts.
‘This fund benefits from an experienced eight-person team led by Peter Meany, who has nearly two decades of experience in the infrastructure sector,’ says Fatima Khizou, research analyst at financial data specialist Morningstar.
‘The team takes a broader definition of infrastructure than many of its peers. The investment process aims to balance value and quality through a bottom-up approach with an emphasis on operators of infrastructure assets, primarily
in developed countries. We believe it can continue to serve investors well.’
First State aims to generate an income in the region of 3% to 5% per year. Once combined with capital growth, investors should expect approximately 10% annual total return over the long term.
‘The fund is relevant for a number of investor outcomes,’ says Square Mile. ‘It offers the potential for capital accumulation, an income which should grow in real terms over time and protection from inflation over the longer term.’
NEWTON GLOBAL INCOME (GB00B8BQG486)
Ongoing charge: 0.79% Dividend yield: 3.1% Annualised return over 3 years: 16.6% This is a great option for investors seeking to have stakes in big companies listed or located through the world. At the time of writing it has the bulk of investors’ funds spread across four sectors: consumer defensive, consumer cyclical, technology and healthcare. There is also a notable, yet slightly smaller, exposure to utilities as well.
The aim is to give investors a rising income stream and also grow the value of capital. It looks particularly suitable for investors in their 30s to 50s who want to leave their money to grow quietly in the background while they get on with their lives.
Hopefully once you reach retirement, the value of the fund will have increased considerably, particularly if you’ve gone for the ‘acc’ version which rolls up income within the fund and boosts the capital value. You will enjoy compounding benefits by going down this path rather than the taking the income as cash. At retirement, you may wish to switch to the ‘inc’ version to maintain exposure and start collecting income which it pays out once a quarter.
‘Asset manager Newton takes a global thematic approach to investing which focused on structural changes impacting the global economy such as demographic shifts and the growing demand for healthcare,’ says Square Mile. Current holdings include tech giant Microsoft and pharmaceutical firm Novartis.
TB SARACEN GLOBAL INCOME AND GROWTH (GB00B3XPLG55)
Ongoing charge: 0.99% Dividend yield: 2.6% Annualised return over 3 years: 12.4% Launched in 2011, the Saracen fund looks like it has the right ingredients to reward investors with a higher level of income year after year. That’s because it has a tight focus on companies which generate sustainable revenue, profit and dividend growth – rather than chasing high yielding companies simply to make its own headline yield look attractive.
‘There is a clear and understandable modus operandi in place, with the team aiming to invest in global leaders that have the propensity to continue to grow over the next five years,’ says Square Mile.
For a fund with a bias towards larger sized businesses, it is refreshing to see none of the usual big names in its top holdings which you normally see in other large cap equity funds.
Instead, you’ve got the likes of materials group Compagnie de Saint-Gobain, tech firm IBM and investment bank UBS as key holdings.
Saracen has outperformed the MSCI World High Dividend Yield index in three out of the last five years. You wouldn’t have lost money in the two ‘bad years’, either. (DC)