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

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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.’


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.


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)

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