Not all global equity funds are created equal.
Presented with such a wide range of markets and opportunities, picking the best companies to invest in requires a rigorous process, skill, experience and a long-term view.
that shareholders enjoy - and you could too.
Global reach: choosing from the world's best companies
Reason 1: Global portfolios can choose from the world's best companies
Nowadays, limiting yourself to a single nation or region means ruling out potential world-leading companies from across the globe.
One of Martin Currie Global Portfolio Trust’s key advantages is its global remit.
By investing globally, you can avoid the risks inherent in single-country exposure, but it also opens up the investible universe and provides access to some of the best companies in the world.
Look at the giants of the technology sector and some of the biggest growth stories in recent times: Apple (US), Facebook (US), Tencent (China), Samsung (Korea) and Alibaba (China) to name just a few!
The unfortunate reality is that not a single one of them is a UK company.
And this advantage is clearly visible in the excess returns delivered by global equities compared with UK equities.
To illustrate, the chart below highlights that if you had invested the current ISA allowance (£20,000) five years ago, you would be over £10,250 wealthier choosing global equities.
And both would have outperformed corporate bonds and bank accounts.
Of course, there is absolutely no guarantee that this performance will be replicated in the future. Subject to certain limits, the money in your bank account is not at risk.
Reason 2: Instant diversification
The inherent diversification offered by global products means that they are often referred to as 'one stop shop' portfolios. They are regularly used as a 'core' holding that can be supplemented by other niche or specialist products.
And single nation markets often lack diversification. The UK market suffers from a extreme level of concentration, for example.
Take the FTSE All-Share index in the UK. Over 50% of the companies represented are in just three sectors - Financials, Consumer goods and Oil & Gas.
Put simply - the UK market has a lot of eggs in very few baskets compared to the global equivalent.
This means that if something goes wrong with just one of the UK giants, it could have an very adverse effect on an investor’s income stream.
If several 'fail' - like in 2008 when the banks and many large companies collapsed - it could be catastrophic.
As at end August 2018, Martin Currie Global Portfolio Trust was was invested in a wide range of around 40 companies from 14 different countries. It includes some of the world’s best known companies such as Apple, Visa, and Airbus and the owners of exciting brands like Starbucks, Facebook and Zara.
This diversification offers an exciting option for investors who are looking for an instant 'core' portfolio.
Attractive income in a low yield environment
Reason 3: Attractive income in a low yield environment
A long period of low interest rates means that it has been hard to achieve a reasonable income.
Predominantly an investment designed for growth, Martin Currie Global Portfolio Trust also pays quarterly dividends to shareholders.
The current dividend yield of 1.7% is over 20% above the sector average, the Association of Investment Companies (AIC) global sector. (Source AIC, 31 August 2018).
Specifically, this means that if you had invested the current ISA allowance of £20,000 when the company started in 1999, you would have received more than £14,000 in dividend payments alone.
The annualised dividend growth rate since inception has been over 6% which is above inflation. This means that your spending power is increased.
And even though taking dividends reduces your total return - your original investment would still have grown substantially - more than doubled in fact.
Of course, you can also choose to reinvest your dividends and that effect, known as compounding, can dramatically increase the value of your investment.
Dividend distributions are made in January, April, July and October. This income could be used to supplement a pension or any other income stream you have – or it could be reinvested to boost your total return.
And it's interesting to note that the annual dividend has never been cut – even through some of the most difficult equity market conditions such as the global financial crisis in 2008.
In fact, one of the key benefits investment trusts offer is the ability to retain earnings in the good years to bolster dividend payments in others.
This is a real advantage over similar investments, such as OEICs, which cannot do this and may therefore present a more volatile income stream.
Past performance is not a guide to future returns and the majority of charges will be deducted from the capital of the Company. This will be a constraint on capital growth in order to maintain the income stream.
Reason 4: Shareholder-friendly policies
Martin Currie Global Portfolio Trust boasts some specific attributes that may be appealing to you.
Like other shares in the stockmarket, market sentiment can affect the value of the share price of an investment trust and, as a result, the share price may be higher (premium) or lower (discount) than the value of the assets held, known as the net asset value or NAV.
To some investors this may appear complicated and provides a reason to use other types of investment vehicle.
Martin Currie Global Portfolio Trust introduced the innovative ‘zero discount’ policy in July 2013 to address key parts of this issue.
Under normal market conditions, the policy aims to limit the discount. This means that the NAV and the share price will, typically, trade close to the NAV.
This policy has the potential to reduce discount volatility (see chart on the right).
In extreme market conditions however (like those following Brexit) the implementation of this policy may be relaxed.
Actively managed by equity experts
Reason 5: Actively managed by equity experts
Martin Currie Global Portfolio Trust aims to achieve long-term capital growth in excess of the capital return of the FTSE World index.
Portfolio Manager, Zehrid Osmani, is supported by an experienced team of global equity specialists who aim to select around 40 of the best international stocks for the portfolio.
The team rely on their own research to identify the best ideas for the portfolio. Some of the key beliefs are:
We aim to invest in high quality companies
This may seem obvious but we aim to invest in high quality companies that invest in their future and deliver sustainable growth. They tend to generate a high 'return on invested capital' which means that they invest a portion of their cash back in to the business helping it to grow, flourish and remain competitive.
We seek companies that have a competitive advantage which can help to protect future profit margins. We also prefer companies with an established track record, product lines and proven history rather than the next flash in the pan.
We aim to hold for the long term
When we find a strong company we aim to hold on to it for a long time. That way the returns compound - or build up - over the years. Einstein is even quoted as saying that compounding is one of the greatest forces in the universe.
Our analysis can rule-in or rule-out many companies - but what can look like a good idea on paper may not prove to be a great long-term investment. That's why we meet the management of every company we invest in rather than taking a leap of faith.
Of course, we keep a very close eye on every company we invest in - we are active managers after all.
We are strict and only buy at the right price
Only a few companies meet our strict criteria.
That's why we choose to have a portfolio of around 40 high quality companies. That means we can invest meaningfully in our best ideas - and 'put our money where our mouth is'. In fact, we believe that most fund managers hold too many stocks and that waters-down their conviction.
And we only buy at the right price.
Many companies can be excluded simply because we believe that they are too expensive. That's when short-term volatility can be our friend. While market ups-and-down can have some commentators or traders running around in a panic buying and selling, it can mean we snap up good companies at the right price - or even cheaper.
We like bargains too.
Risks and important information
Past performance is not a guide to future returns.
This information is issued and approved by Martin Currie Investment Management Limited. It does not constitute investment advice.
Market and currency movements may cause the capital value of shares, and the income from them, to fall as well
as rise and you may get back less than you invested.
Please note that, as the shares in investment trusts are traded on a stockmarket, the share price will fluctuate in accordance with supply and demand and may not reflect the value of underlying net asset value of the shares.
Depending on market conditions and market sentiment, the spread between purchase and sale price can be wide. As with all stock exchange investments the value of investment trust share purchases will immediately fall by the difference between the buying and selling prices, the bid-offer spread.
The value of investments and the income from them may go down as well as up and is not guaranteed. An investor may not get back the amount originally invested.
Investing in foreign markets introduces a risk where adverse movements in currency exchange rates could result in a decrease in the value of your investment.
Emerging markets or less developed countries may face more political, economic or structural challenges than developed countries. Accordingly, investment in emerging markets is generally characterised by higher levels of risk than investment in fully developed markets.
Investment trusts may borrow money in order to make further investments. This is known as 'gearing' and can enhance shareholder returns in rising markets but, conversely, can reduce them in falling markets.
The majority of charges will be deducted from the capital of the company. This will constrain capital growth of the company in order to maintain the income streams.
Martin Currie Investment Management Limited, registered in Scotland (no SC066107). Registered office: Saltire Court, 20 Castle Terrace, Edinburgh EH1 2ES. Tel: 0808 100 2125 Fax: 0870 888 3035 www.martincurrie.com. This company is authorised and regulated by the Financial Conduct Authority. Please note that calls to the above number may be recorded