Unlocking global opportunities: a deep dive into the pros and cons
There are thousands of companies listed on the world’s stock markets that are all vying for the attention of investors. These businesses operate in areas as diverse as technology, pharmaceuticals, mining and property, as well as various consumer-facing sectors.
But how do you know which are worth buying? What do you need to look for in potential holdings and are there ways to manage your risk?
Here we take an overview of global equities, look at the pros and cons of buying company shares, and highlight investment funds worth considering.
What are global equities?
Let’s start with the basics. The term ‘global equities’ refers to businesses whose shares are listed on stock exchanges across the world. These international marketplaces include the New York Stock Exchange, the Tokyo Stock Exchange and our very own London Stock Exchange. There are currently 57,650 listed companies with a combined equity market capitalisation of $101.17trn*, according to the World Federation of Exchanges.
So, where should you start? The first decision to make is whether to buy individual company shares or opt for an investment funds.
Companies or investment funds
Buying shares in a company will give you undiluted exposure to a particular business. If the share price rises you will benefit. If it falls, then the value of your holding will also drop. Making a judgement call on a potential holding will also require plenty of research, which is why professional stock pickers work with teams of analysts.
A better option for many people – especially less experienced investors – is to opt for a fund whose manager is responsible for making portfolio selection calls. This approach will also give you a degree of diversification as such funds can often hold in excess of 30 stocks so returns are less dependent on a handful of names.
Why should you consider a global equity fund?
- Potential to invest in exciting, international companies
- Diversified exposure to fast-growing and established sectors
- The chance to invest money outside of your home market
- A professional fund manager making the asset allocation calls
Choosing a fund
If you fancy going down the fund route, you’ll still have choices to make. There are numerous global equity funds available and each will have a slightly different mandate. For example, some global equity funds are focused on providing an income for investors. This means they’ll buy companies that pay shareholders a regular dividend out of profits made.
Then there are funds that prefer to back growing companies. Although these businesses are often innovative, younger firms, their returns may be rather volatile. You will also need to decide whether you want to be invested in large or small capitalisation companies – or a mixture of the two – and which regions look the most attractive.
Which funds should you consider?
Here we take a look at three global equity funds that are worth a look. Each differs slightly in terms of its aims and objectives.
JOHCM Global Opportunities
The first fund on our list, which is managed by Ben Leyland and Robert Lancastle, can invest in any company around the world, albeit with a bias towards large and medium-sized businesses. It aims to generate long-term capital and income growth through the active management of a concentrated portfolio of global equities. Currently, it holds 39 positions**.
The managers look for opportunities where the market is underestimating the value created by well-known companies that reinvest wisely to create sustainable compounding returns. Its largest holdings include Henry Schein, a US health care product distributor, and Compass, the UK-based provider of food and support services**.
Fidelity Global Dividend
The Fidelity Global Dividend fund could be an attractive option for investors wanting a stable – and potentially rising – income. The portfolio, which is managed by Dan Roberts, aims to pay a regular and growing income, while also preserving capital. It’s unconstrained in terms of where in the world it can invest, while its value investing influence means Dan is less likely to overpay for a stock.
The fund has around 30% exposure to the US, with 15% in the UK and 12% in France**. Financials has the largest sector exposure, followed by industrials and consumer staples, while RELX, the London-based analytics company has a 5% share of assets under management**.
CT Global Extended Alpha
Our third suggestion has a 130/30 structure. This enables the CT Global Extended Alpha fund to make money from companies doing well – as well as those that underperform. Its manager, Neil Robson, buys stocks he expects to go up in value, while ‘shorting’ those that he predicts will perform badly.
We see this as a hidden gem in the global sector that has consistently delivered excellent returns, even though it remains off the radar of many investors. While the fund has benefited from its quality growth style being in favour in recent years, its long-term performance has still been very strong.
*Source: World Federation of Exchanges, January 2024
**Source: fund factsheet, 31 December 2023
Past performance is not a reliable guide to future returns. You may not get back the amount originally invested, and tax rules can change over time. The views expressed are those of the author and fund managers and do not constitute financial advice.
