Over the past five years, investors have had plenty of chances to lose money, with bear markets in 2022, political instability, geopolitical conflict, sticky inflation and market concentration.
While investors have various metrics to assess a fund’s ability to handle these downturns, such as downside protection or maximum drawdown, one contender is recovery periods. This refers to the number of months a portfolio took to recover from its biggest loss.
In the IA Global sector of roughly 596 funds, even filtering by the top quartile for recovery periods would leave investors with around 149 choices. So, to take this one step further, we also filtered the universe for funds with ‘supranormal performance’, funds that have doubled investors’ money over the past five years.
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The full list of funds which matched these criteria can be found below.
Top of the chart is the Ranmore Global Equity fund, led by former hedge fund investor Sean Peche.
The fund prides itself on a differentiated approach, with relatively low exposure to areas such as North America (less than 30% of the portfolio) and technology (less than 10% of the total allocation).
“’Don’t lose money’ might seem as obvious to you as it does to us, but when so much of the fund management industry these days is focused on not deviating from benchmarks, it seems ‘losing money’ is fine, as long as everyone else is also losing money,” the team said during their most recent factsheet.
“Market ‘storms’ happen and when they do, everyone gets wet in the short-term, but we think our process has stood the test of time.” With a recovery period of just 10 months, paired with the fifth-best total return in the sector at 144.8%, this approach seems to be paying off.
But Peche’s fund was not the one that recovered the fastest in absolute terms on our shortlist. That title is split three ways between the Thornbridge Global Opportunities fund, the Fidelity Global Industrials fund and the M&G Global Strategic Value fund, which all delivered more than 100% total return, with six months spent recovering from their downturn.
See also: Interview with Stefan Sommerville, senior investment specialist, Orbis Investments
The next best-performing active fund to appear on the short list for recovery periods was the Orbis Global Equity fund.
This is another fund house that prides itself on a “contrarian approach” looking across the market and sectors for returns, while hoping to minimise the risk of serious loss. At the time of writing, industrials represent roughly 23% of the total portfolio.
However, it also includes some of this year’s more popular stocks, such as TSMC and Samsung Electronics.
Over the past five years, it took just 13 months to recover from its worst downturn, with its maximum loss for the period coming in at just 8.5%, according to FE fundinfo
Analysts at The Fund Research Centre praised the team for its “distinctive and naturally contrarian investment approach” and focus on differentiated thinking.
The team also pointed to Orbis’ private ownership structure as a key contributor and has proven “very helpful at times of market dislocation when the contrarian nature of the investment process tends to shine”.
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For investors willing to stomach a slightly longer recovery in exchange for supranormal returns, the Allianz Best Styles Global AC Equity fund might stand out. At 17 months, its recovery time was barely faster than the MSCI ACWI and only seven months better than the average IA Global peer.
However, while the average global fund has taken home a 43.2% total return over the past five years, managers Erik Mulder and Andreas Domke are up 101.9%.
Analysts at Rayner Spencer Mills Research (RSMR) have rated the fund highly, due to its systematic approach and “ability to harvest risk premia from different factors”.
The fund implements a diversified exposure to five different factors, including value, momentum, revisions, growth and quality.
“The fund can be expected to have a better drawdown profile than the index, and its sector and country constraints should ensure it can perform at least in line with the benchmark in the short term,” analysts said.
Four index trackers and smart beta funds also made the short list: the Xtrackers MSCI World Value UCITS ETF, iShares Edge MSCI World Value Factor UCITS ETF, Invesco Global Ex UK Core Equity Index and L&G Global 100 index Trust.
