Best in Class: JOHCM Global Opportunities fund

Diversity has been the buzzword of 2019 for investors, as they seek to navigate a path through the many challenges facing markets.

It is hard not to read an economic outlook which does not fret about Brexit and trade wars, while the unknown nature of the slowdown in China – and the potential ripples this has on other markets - continues to perplex.

Investors have wanted to hedge their bets to protect themselves, but at the same time not miss out on any further market rises - and the result is that global equity funds have never had it so good.

According to the Investment Association, global funds were the best-selling sector in March 2019, with £691m in net retail sales – the highest inflow on record. That same month, every individual region, bar Japan, saw outflows.

Investors have wanted to hedge their bets to protect themselves

Global equity funds are often used as the cornerstone of an investor’s portfolio. But the 300 plus funds in the IA Global sector all look very different, given the choice of companies they can invest in.

Having talked about a global equity income option two weeks ago, this week’s Best in Class is a high conviction growth portfolio which has a strong bias towards both large and medium-sized firms.

JOHCM Global Opportunities fund is managed by Ben Leyland and Robert Lancastle and has a strong focus on capital preservation.

Ben Leyland has almost 20 years' investment experience.

He previously worked as a financial analyst at Schroders and, in 2006, joined JOHCM to work on the UK Opportunities fund with the highly regarded John Wood (who has since retired). Mr Leyland went on to launch JOHCM Global Opportunities fund in 2012 and has been managing it ever since.

Robert Lancastle has been co-manager on the fund since May 2017, but has worked on the fund since launch.

As mentioned, capital preservation is the main building block of the investment process. The managers begin by screening out companies with the biggest causes of capital destruction; weak franchises, over-geared balance sheets and over-valued assets.

They then focus their research on high quality, high return on capital businesses. Companies are valued on a best- and worst-case scenario. The managers particularly like opportunities where downside risk is low relative to the potential upside. Unlike some of their peers, capital preservation does not mean low conviction. Despite retaining a focus on both country and sector diversification, the fund typically has only 30-40 holdings.

At present, the fund has 34 holdings, with its largest positions in multinationals in the shape of energy firm Enel Spa (4.5 per cent), and IT services providers Cognizant Technology Solutions (4.35 per cent) and Oracle Corp (3.96 per cent).

It currently also has a high allocation to cash (19.6 per cent).

This is not uncommon for the fund, when the managers believe valuations are stretched and stock-specific volatility could be high. They will look to use it by adding to positions at times of weakness.

On occasion they may add new names instead, but they strongly believe in the power of a concentrated portfolio, so will all the time be making sure that they are not making inappropriate compromises or diluting the portfolio too much.

Performance has been strong since launch, with the fund returning 150.56 per cent compared with 113.9 per cent for the sector average. Despite the large allocation to cash, the conviction in the other holdings has meant it has also outperformed over one year, returning 12.02 per cent compared with 7.03 per cent.

The cautious nature and strong risk-adjusted performance of the fund makes it a strong core global equity holding for investors.