A global equity fund that moves with the times

Capital Group Global Equity fund has been a stellar fund over the years. But it’s not resting on its laurels. The fund is adjusting its portfolio in response to the COVID-19 pandemic.

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This global equity fund is run by four managers with an average 29 years professional investment experience and an average 19 years with Capital Group.

Capital Group Global Equity Fund has held up relatively well in the market slump. In the first quarter, the fund declined 11.6 per cent, compared with a 13.7-per-cent decline for the MSCI (Morgan Stanley Capital International) All Country World Index. Management attributes this outperformance to the fund’s solid holdings in financial stocks and the healthcare sector, and relatively lower exposure to hard-hit energy stocks.

The investment objective of Capital Group Global Equity Fund (Series A fund code: CIF843 (FE)) is long-term growth of capital through investments primarily in common stocks, including growth-oriented stocks on a global basis. Future income is a secondary objective.

Capital Group’s investment strategy is to seek undervalued securities that it believes represent good long-term investment opportunities. The firm uses a ‘bottom-up’, research-driven approach to investing that focuses primarily on individual companies, not industries or regions. Securities may be sold when portfolio managers believe they no longer represent good long-term value.

Managers with long-term experience

Under Capital’s approach, multiple portfolio managers have individual responsibility for a portion of each fund’s assets. The global equity fund’s management team is made up of four managers who have an average 29 years of professional investment experience and an average 19 years of employment with Capital Group.

Capital’s approach has worked out very well for the global equity fund. It has performed in the top quartile of the global equity category in each of the past one-, three-, five- and 10-year periods. In the 10 years ended Dec. 31, 2019, it performed in the top quartile in four years and the second quartile in six years.

The fund has achieved these above-average returns while limiting volatility. Its three-year standard deviation is slightly higher than that of the global benchmark index and is about average for our Multi Country International Stock Funds.

The fund’s managers have adjusted the portfolio for the near-term challenges posed by the COVID-19 pandemic, as well as a potential recovery. They’ve reduced exposure to the US to 37.5 per cent from 48.9 per cent at the end of 2019. At that time management believed there were better value opportunities in Europe. Consequently, the portfolio’s Europe (ex-UK) weighting is now 23.0 per cent, up from 21.7 per cent at the end of 2019 and 14.4 per cent at the end of 2018.

The fund’s cash position is now 12.7 per cent, up from 3.8 per cent at the end of 2019. This change is meant to help managers take advantage of emerging opportunities.

Exposure to the technology sector has increased to 19.5 per cent from 18.0 per cent and is the largest sector in the fund. Management has increased exposure to such stalwarts as ASML, a Dutch supplier to the semiconductor industry, and Advanced Micro Devices, an American multinational semiconductor company.

Capital Group Global Equity Fund is a buy if you’re seeking primarily long-term growth from companies located around the world and you have medium risk tolerance.

This is an edited version of an article that was originally published for subscribers in the May 15, 2020, issue of Money Reporter. You can profit from the award-winning advice subscribers receive regularly in Money Reporter.

Money Reporter, MPL Communications Inc.
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