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Value Line’s Global Equity objective group consists of mutual funds that can own stocks from any country in the world. This is very different from the Foreign objective, in that global funds can own U.S. stocks while foreign funds specifically cannot. This is an important distinction about which investors using an asset allocation model should be aware, as the domestic component of a global fund can throw off certain allocations if the fund’s portfolio isn’t properly accounted for in the larger plan.

Still, for some investors who are seeking international exposure but are also concerned about the risks of owning a fund that invests exclusively in foreign stocks, a global fund might work quite well. The problem, however, is that many of these funds place a significant amount of their portfolios in U.S. stocks. This can make their portfolios very close in nature to growth funds that are allowed to invest in foreign markets. Thus, it is important to review a global fund’s holdings carefully to see if it is a good fit. Moreover, it might make sense to compare a final list of candidates from this objective group against more broadly invested growth funds.

Funds in the Global objective group are, by design, generally well diversified. In fact, some funds in this group actually use the word “world” in their names to express just how broad their investment mandate is. Despite that broad mandate on the country front, many here take specific investment approaches, such as focusing on small cap companies, dividend paying companies, or growth and value investment styles. There are also a number of funds here that are designed to be the sole stock offering in a portfolio.  

Over the long term, the Global Equity objective group has been a good performer relative to the broader market, as measured by MSCI WORLD Index. For the 10-year period ended June 30, 2012, the group had an annualized gain of 5.7%, while the MSCI WORLD Index reported an annualized gain of 4.0%. Over the trailing five and three year periods, the group had a loss of 2.3% and a gain of 11.4%, respectively, while the Index reported a loss of 4.8% and a gain of 8.6%, respectively. During the one-year period ended June 30, 2012, the Global Equity objective group reported a loss of 6.7%, compared to a loss of 7.2% for the MSCI WORLD Index. The group has an average Risk Rank of 3, indicating that funds in this group might appeal to many investors, who would only need to accept an average level of risk.

Year to date through June 30, 2012, the Global Equity objective group has outperformed the broader global market as measured by the MSCI WORLD Index. It reported a gain of 5.7% versus a gain of 4.5% for the Index. 

One fund with a relatively high year-to-date return through the six months ended June 30, 2012 is Columbia Marisco Global Fund A (COGAX). This fund’s investment objective is long-term growth of capital. It pursues this goal by investing mainly, or at least 40% of its assets, in the securities of companies organized or located outside the United States. Management normally invests in common stocks and may select companies of any size. 

The fund may invest without limit in foreign securities, and may trade in the U.S. or in foreign markets or both. Generally, stocks are selected on a security-by-security basis based primarily on growth potential rather than geographic location or other considerations. Its core investments may include more established companies that offer long-term growth potential. However, less mature companies with more aggressive growth characteristics may also be included in the portfolio. The fund may also use options and other derivatives to hedge the portfolio.

As of June 30, 2012, the fund reported that about 64% of its investments were with United States, Switzerland (7%), Hong Kong (6%), Belgium (4%), and Italy (4%), with the balance (15%) in other countries and cash. 

Another fund with a relatively good year-to-date return through June 30, 2012 is Aberdeen Global Small Cap Fund A (WVCCX). This fund’s objective is to seek long-term capital appreciation. 

To achieve this objective, the fund invests at least 80% of its assets in the equity securities of small U.S. and foreign companies. Management’s plan is to invest at least 40% of its assets in companies located or conducting a majority of their business outside the U.S.  Under normal conditions, the fund invests in securities from at least three different countries. The fund will not consider a company with a market capitalization in excess of $6 billion, however, this maximum may change with market conditions.

However, once the fund invests 80% of its assets in small cap, it can invest the remainder in companies of any size. It may also invest up to 20% of assets in debt securities, up to 10% of assets in private funds, without limit in special-situation companies and/or foreign securities, and up to 35% of assets in emerging markets securities. In choosing stocks, the fund uses a “bottom-up” approach, characterized by intensive, first-hand research and disciplined company evaluation. Management generally makes long-term investments and its latest reported portfolio turnover rate was 22% per year as of June 30, 2012. 

A third fund with very good return through the first six months of 2012 is Putnam Global Industrials Fund (PGIAX). This fund’s investment objective is capital appreciation.

Under normal market conditions, the fund invests primarily in common stocks of large and midsize companies worldwide. These companies are involved in the research, development, manufacture, distribution, supply, or sale of industrial products, services, or equipment. 

Using bottom-up research, management attempts to determine which companies will grow future earnings, cash flows, and dividends.  Also, a company’s competitive position in its industry and management strength are assessed. The fund may also use options, futures, warrants, and swap contracts to increase returns and/or reduce risk. 

In the table below, we have listed 10 top-performing funds through June 30, 2012 that we follow in our Fund Advisor database.

 

10 Top Global Equity Funds Performance

 

Fund Name

Ticker

% Year-to-date

Total Return

% 1 Month

Total

Return

% 3

Month

Total

Return

% 6 Month

Total

Return

% 5 Year

Total

Return

Annualized

Columbia Marisco Global A

COGAX

11.66

-8.15

-1.34

8.13

 

Harbor Global Growth

HGGIX

11.48

-8.55

-1.51

  

7.99

 

  

Marisco Global

MGLBX

10.74

-8.77

-1.92

7.41

 

Aberdeen Global Small Cap A

WVCCX

9.35

-6.83

-4.35

6.47

-2.41

Alpine Global Consumer Growth A

AWCAX

9.05

-8.00

-4.31

 

 

Hartford Global Growth A

HALAX

6.69

-10.39

-8.68

3.12

-5.54

Beck Mack & Oliver Global Equity

BMGEX

6.70

-5.36

-5.46

6.33

-3.13

Putnam Global Industrials A

PGIAX

6.58

-7.79

-7.12

4.09

-1.03

American Century Global Growth A

AGGRX

6.38

-8.58

-5.88

4.22

-1.94

Driehaus Global Growth

  

DRGGX

6.23

-9.46

-7.66

2.55

 

Global Equity Objective Group

  

1.81

-8.36

-8.35

0.30

-3.07

  

  

 

At the time of this article's writing, the authors did not have positions in any of the funds mentioned.