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Global gains: the top international equity managers revealed

Citywire Americas analysis looks at the best performing global equity managers over the past five years.

New beginnings

Global equities enjoyed a strong start to 2017 as optimism grew over the growth prospects for the US and Europe. However, political risk and valuations concerns have began to undermine investor sentiment as the first quarter drew to an end.

Doubts over the direction US president Donald Trump's policies over trade and immigration, the initiation of Brexit negotiations and the French presidential elections have contributed to fears that these political risks will drag equity markets down.

On the other hand, emerging markets stocks rebounded in 2017 and US large cap stocks have also produced strong returns. Valuations are expensive but pockets of opportunity still remain in key markets.

In this analysis we take a look at the best performing managers in global equities to find out where they have been generating returns over the past five years.

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5. Michael Lindsell and Nick Train, Lindsell Train

Fund: Lindsell Train Global Equity B

5-year performance: 89.07%

Kicking off the ranking are Michael Lindsell and Nick Train, managers of the $2.8 billion Lindsell Train Global Equity fund since its launch in March 2011.

The duo run a concentrated portfolio of 20-35 stocks of mostly large companies, prioritizing equities listed in developed countries. As of the end of February, Unilever came in as the top holding at 8.5%.

Following Kraft Heinz’s failed bid to acquire Unilever for more than $140 billion, Lindsell and Train increased their exposure to the company, according to a note dated beginning of March. Citywire A-rated Lindsell and AA-rated Train pointed to factors such as the fact that Unilever is trading at more than 20 times earnings.

‘All we can say is that obviously special companies like [Unilever] (look at the dividend history) are very rare and very valuable,’ the duo wrote.

Other top holdings include multinational beverage company Diageo at almost 8% and Heineken Holdings at 7.5%.

The US ranks first in the fund’s country allocation with 34.6%, followed by the UK at 27% and Japan at 23%.

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4. Richard Pzena, Pzena Investment Management

Fund: Pzena US Large Cap Dynamic Value

5-year performance: 89.58%

Focused on long-term alpha generation rather than income, Richard Pzena’s $6 million fund holds more than 85% of its investments in US equities. The rest of the allocation resides in Canada, Europe and countries such as Bermuda.

The fund usually holds 50-80 stocks and focuses on companies underperforming their historic earnings power. While Pzena launched this version of the fund in June 2012, his track record over five years covers a similar vehicle he ran from 2007 until its closure in 2013.

Royal Dutch Shell and Exxon Mobil rank as the top holdings, Pzena has tipped the rest of the fund toward the financial sector, with companies such as JP Morgan Chase and Citibank accounting for about 38% of the portfolio.

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3. John Boselli, Wellington Management

Fund: Wellington Global Quality Growth

5-year performance: 98.24%

With more than 30 years of experience, Citywire A-rated John Boselli runs a fund focused on long-term returns. He aims to balance growth, valuation, capital returns and quality in his stock picks.

His $884 million fund held 72 equities as of the end of February, according to its fact sheet.

Alphabet, Inc., Google’s parent company, figured as the top holding at just 2.4%, closely followed by Microsoft and Bank of America.

Like other top global equity managers, Boselli is heavily invested in North America, with that region accounting for more than 64% of the portfolio. But he’s also betting on emerging markets, which make up 17% of his picks. The fund is biased towards companies in IT and finance.

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2. Gonzague Legoff, Natixis Global Asset Management

Fund: H2O Multiequities

5-year performance: 99.63%

The fund Gonzague Legoff runs, launched in 2011, aims to outperform the MSCI World Developed Markets index by 4% per year by investing in equity markets and currencies.

With a 5-year investment horizon, Citywire-A rated Legoff strives to stay under an 8% tracking error per year. He manages the $238 million fund with a ‘highly reactive’ to macroeconomic indicators that also bets on short-term market anomalies such as currency arbitrage.

H2O Asset Management, the affiliate of Natixis Global Asset Management that runs the fund, had $12 billion in assets under management as of December 2016.

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1. Terry Smith, Fundsmith

Fund: Fundsmith Equity, Fundsmith Equity Fund Feeder

5-year performance: 104.05%

A veteran of the industry, Terry Smith takes the number one spot. The Citywire AAA-rated manager set up the Fundsmith Equity fund in 2010 with $25 million of his own money.

Smith’s fund invests in global equities that don’t require significant leverage and that can withstand technological innovations, among other criteria.

The two vehicles Citywire tracks fall under a $1.2 billion master fund with a concentrated portfolio of 20-30 stocks that features animal healthcare firm IDEXX and medical devices manufacturer Stryker as top holdings. More than a third of the investments are in consumer staples, with healthcare and technology making up more than 20% each.

An active investor, he wrote in a February note that managers can exploit market inefficiencies generated by ETFs. Flows into ETFs will cause some companies to perform well regardless of their value, he says.

‘An active fund manager should regard this as an opportunity to own more of the shares which are better than the index average and will eventually produce superior returns if the manager and the investors have the patience necessary to wait for this to occur.’

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Related Fund Managers

Nick Train
Nick Train
7/1157 in Equity - Global (Performance over 3 years) Average Total Return: 47.08%
Richard Pzena
Richard Pzena
59/1157 in Equity - Global (Performance over 3 years) Average Total Return: 30.17%
John Boselli
John Boselli
13/1157 in Equity - Global (Performance over 3 years) Average Total Return: 43.05%
Gonzague Legoff
Gonzague Legoff
17/1157 in Equity - Global (Performance over 3 years) Average Total Return: 37.92%
Terry Smith
Terry Smith
2/1157 in Equity - Global (Performance over 3 years) Average Total Return: 55.97%
Michael Lindsell
Michael Lindsell
3/157 in Equity - Japan (Performance over 3 years) Average Total Return: 49.08%
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