Go past large-cap headline exposures: Morningstar
Investors and advisers can consider large-cap global share funds as core holdings but it is vital to go past the headline exposures and be abreast with the nature of the underlying portfolio and strategy, according to Morningstar.
The Morningstar Sector Wrap-Up report for global equities investment strategies, which covered 92 individual vehicles, gave four strategies the highest Morningstar analyst rating of gold, while making 53 of the 92 strategies Morningstar medallists.
Magellan Global was elevated from silver to gold as Morningstar was satisfied with its ability to manage a growing team and funds under management growth.
A slow increase in assets saw Vanguard International Small Companies head towards full replication, resulting in an upgrade from neutral to bronze.
However, Capital International Global Equity was downgraded from bronze to neutral, because despite organisational changes, there is little confidence in the strategy's ability to generate above-market returns.
Despite an unimpressive performance of active managers relative to global equity indexes in 2014, it still has some sufficient fundamental explanations.
"For example, valuation-related concerns attributable to unprecedented central bank stimulus spurred many managers to have underweight exposure to the US, a market which continued to outperform in 2014," the report said.
"Underperformance related to such circumspection is not necessarily a bad thing. Besides, some of our highest-rated managers, including Magellan Global and Platinum International, still boast impressive track records over the course of a market cycle."
Unhedged global equities exposure was still a cheap and effective way to diversify equity risk at the total portfolio level despite dips in the Australian dollar compared to their developed market currencies.
AUTHOR
Malavika Santhebennur
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