Using data from FE Fundinfo, Portfolio Adviser shines a spotlight on the funds across different sectors that are smaller than £200m in size but have achieved top-quartile returns over the past three years relative to their average peer. Below, we look at IA Global Equity Income funds that are flying above market returns but below investors’ radars.
WS Guinness Global Equity Income
Fund size: £153m
The WS Guinness Global Equity Income fund delivered one of the highest returns in the IA Global Equity Income sector over the past three years despite being one of the smallest portfolios in the group. This £153m fund soared 43% over the period, climbing well above its peer group’s average return of 29.6%.
It was launched in November 2020 (since then it has made an even higher return of 49.6%) but the strategy implemented by managers Ian Mortimer (pictured above left) and Matthew Page outdates it by several years. An offshore version has existed since 2011, during which time it was up 314.3%, a sizably higher return than the peer group’s 199.2% rise over the same period.
Mortimer and Page assess the companies they invest in first and foremost by their quality before taking the dividend into account. This has led the fund to have one of the lowest yields in the sector at 2.1%, but its focus on cashflows may have shielded it from the worst of the market’s volatility. It had one of the lowest volatility rankings over the past three years at 7.8 and and one of the shallowest maximum drawdowns, falling just 4.3% during the most turbulent period.
Through their highly selective approach, Mortimer and Page have built a concentrated portfolio of 35 equally-weighted stocks. Some investors may fret about holding such highly concentrated positions, but analysts at RSMR noted that this has proven effective in delivering exceptional growth as well as defensiveness.
“Volatility levels have typically been towards the lower end of the peer group, thereby vindicating the lower-risk stockpicking approach, despite the concentrated portfolio,” they say. “There are likely to be shorter-term periods when the strategy underperforms but for patient investors, the fund has the potential to outperform both its peers and the global equity index.”
WS Saracen Global Income and Growth
Fund size: £167m
Another small fund to trounce its larger peers over the past three years is WS Saracen Global Income and Growth. This £167m portfolio climbed 41.9% over the period, pushing ahead of the IA Global Equity Income sector’s average return by 12.3 percentage points.
Manager Graham Campbell (pictured above middle) launched the fund in 2011 with the aim of providing investors with both a source of income as well as a vehicle for capital growth. He was joined by co-managers Bettina Edmondston in 2021, and Alasdair Birch in 2022. Together, they have built a 42-stock portfolio that not only offers investors a dividend yield of 3.1%, but has also proved to be an advantageous holding in upward markets. It had one of the highest upside captures over the past three years, climbing 131.5% in strong markets over the period.
Fidelity Sustainable Global Equity Income
Fund size: £97m
Despite being one of the smallest players in the IA Global Equity Income sector at £97m in assets under management, the Fidelity Sustainable Global Equity Income fund delivered one of the group’s highest returns over the past three years, climbing 37.9%.
As its name suggests, the fund seeks out companies offering a healthy and sustainable dividend yield that it can grow over time. Buying shares in these predictable and stable businesses at ‘reasonable valuations’ is another key focus, ensuring the fund does not overpay for quality companies. It deduces that these metrics will protect the fund from market risk, and while performance was slightly rockier than for funds such as WS Guinness Global Equity Income, its volatility ranking of 8.7 over the past three years was one of the lowest in the sector.
Manager Aditya Shivram (pictured above right) took charge of Fidelity Sustainable Global Equity Income in 2021 and has driven this outperformance in the early years of his tenure, but the fund has been active since 2004. Over the past decade alone, the fund made the greatest total return of the whole sector, soaring 267.6%, more than double the 129% made by the average IA Global Equity Income fund over the period.
This article originally appeared in the May issue of Portfolio Adviser magazine