The global equity fund and investment trust sectors contain some of the most popular vehicles with UK investors – including the likes of Fundsmith Equity (B41YBW7) and Scottish Mortgage (SMT).

The big appetite for international exposure should come as little surprise given overseas stocks have comfortably outperformed UK shares for many years, at least until the first month of 2022.

The recent market sell-off has hit some of the highly valued quality names which dominate the portfolios of these global funds. This is reflected in the one-year performance figures and suggests that over the near-term it may be more difficult for global collectives to chalk up the kind of gains experienced in the past decade.

The list of top performers in both the fund and trust categories contains several other big names, alongside Fundsmith and Scottish Mortgage, but it is the presence of passive tracker fund L&G Global 100 Index Trust (B0CNH05) which really catches the eye.

TRICKY TO OUTPERFORM

It has been difficult to outperform developed market indices, dominated by a US market which had, until recently, consistently been hitting new record highs. Even in this list of the very top performing global funds, several have fallen behind the MSCI World index, which many investors use as the benchmark for global stocks and shares.

The L&G Global 100 Index Trust, which has a low ongoing charge of 0.14%, has managed to beat the MSCI World benchmark by tracking the return from the S&P Global 100 index. This is a basket of shares which includes some of the leading businesses from around the world. Like the MSCI World there is obvious American bias; the S&P Global 100 index has a 70%-plus weighting to the US.

Despite the L&G tracker fund being one of the top performers in the global sector on a five-year basis, stock picking skills may come to the fore if the current correction in global markets continues. The expertise of top fund managers might become more important and support the case for using actively managed funds even if they come with higher charges.

ESG IN DEMAND

Fundsmith’s popularity among many investors is backed up by a strong track record of returns, but it has been beaten on a five-year view by four other funds, three of which tellingly have sustainability built into their investment process.

The importance of ESG (environmental, social and governance) factors – amid mounting investor, regulatory and political pressure – has been reflected in the outperformance of funds which apply such criteria when selecting stocks.

Top of the global equity fund leaderboard on a five-year basis is Baillie Gifford Positive Change (BYVGKV5) which looks for businesses which can have a positive impact on the world while still delivering positive returns.

Managers Kate Fox and Lee Qian, who have been at the helm of the fund since its inception, follow the Baillie Gifford blueprint of taking a patient approach. The portfolio is concentrated, with typically between 30 and 50 holdings, and its larger positions include microchip tech firm ASML, US agriculture kit maker Deere & Co and pharmaceutical firm Moderna.

The focus is on capital growth rather than dividends. An ongoing charge of 0.55% compares favourably with other funds in the sector.

Another product from the same stable with a broadly similar remit, Baillie Gifford Global Stewardship (BYNK7G9) also has a strong record and comes with an ongoing charge of 0.5% attached.

TECH BIAS

Liontrust Global Smaller Companies (B29MXF6) is the seventh best performing global fund on a five-year basis. Shares in smaller firms, while typically carrying greater volatility, are often seen as having more growth potential than larger companies.

Steered by Robin Geffen, the Liontrust fund has a bias towards the technology space and the US. The extra cost and complexity of investing in small caps is reflected in a higher ongoing charge versus some of the other top performing global funds at 0.88%.

In the investment trust space, and despite its recent struggles, Scottish Mortgage is by some distance the standout performer. Trailing in its wake is another Baillie Gifford-managed product, Monks Investment Trust (MNKS). Both have relatively low ongoing charges at 0.34% and 0.43% respectively.

DISCLAIMER: Daniel Coatsworth (who edited this article) has a personal investment in Fundsmith Equity Fund.

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