By Tom Aylott, Reporter, 23 October 2023:
Investors often buy global funds for exposure to a wide net of the world’s biggest companies, but some would argue that they are essentially getting US funds.
In an article about the assets that investors should avoid holding together, Bestinvest director Jason Hollands highlighted that US and global funds perform a very similar role…
QuotedData senior analyst Matthew Read said investors should not shy away from global funds where the US is the highest regional allocation, as it is the largest market for a reason.
He said Alliance Trust provides the best exposure to global equities, even though it holds the majority of its assets in the US (55.4%). It is worth noting that this is still 14.3 percentage points less than the MSCI World’s allocation.
Despite its US bias, the £2.9bn trust provides a diversified range of assets due to the differing investment styles of its 10 management teams.
It beat the average IT Global trust by 79.3 percentage points over the past decade, but the benefits of its diversified approach are most notable over the volatility of the past three years.
The peer group struggled in the high inflation and interest rate environment in recent times, dropping 1.6% over that period, yet Alliance Trust made a 29.2% return.
Read said: “The US is the largest market in the global equities universe and so will always be a significant allocation within any generalist global equities portfolio but the combined effect of the trust’s managers is a marked underweight to the US.
“Alliance Trust has benefited from having a mix of value and growth styles within its manager mix in recent years.”
An ideal pairing to this would be the North American Income trust, according to Read. Manager Fran Radano’s value approach in a growth-oriented market means his £381m looks very different from most IT North America trusts.
For instance, technology stocks dominate the S&P 500 at a 27.5% weighting, yet Radano’s portfolio only has 8.2% in the sector.
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