These five global share funds blitzed the market in 2022

In a year where the market was down over 17%, these five global equity funds finished in the black.
David Thornton

Livewire Markets

2022 was a year to forget for global equity investors. The MSCI World Index returned -17.73% over the calendar year, so investors had to beat the market by almost 18% just to break even. No easy task.

But the top fund managers are up to it, proving that active management can outperform when the market is down. Seven of the 86 funds under Livewire's coverage generated positive returns in 2022, while 52 of them beat the index (and thus the passively invested money that tracks it). 

What's striking is that beyond having global mandates, the top funds don't share much else in common - further testament to the skill of these managers rather than the specific corners of the market they play. 

In this wire, I take you through the top five performing funds from last year, and discuss some of the key themes from the results. 

How we compiled the list

The following list was compiled using the information provided here.

  • In the “Fund type” box, select “Managed Funds”
  • In “Asset Class”, select “Fixed Income - Australia and Fixed Income - Global”
  • We then manually filtered results based on 1-year returns.

Important: We have only covered the funds under Livewire's umbrella. Thus, it doesn't represent the entirety of the market. Fund performances are also generally viewed over longer time frames. Of this year's top five fixed income funds, only one has been around for at least five years. This list is also purely information and not advice. Past performance is not a reliable indicator of future return.

Key takeaways

The standout takeaway in these results is the diversity of the top five. We have a fund that uses derivatives, one that invests in infrastructure, another that invests in China, a resources fund, and a yield fund. 

This is exactly what you want to see if you're an investor in managed funds, especially in a down market, because it shows that money can be made in several ways and in several markets. 

So it's not as if the top five are all commodities funds that managed to sell out at the top of the bull market. 

It's worth noting, though, that the funds that do well in down markets are often the same ones that provide solid, but not earth shattering performance through the cycle. Over 3 years, these funds returned 5.10%, 5.76% over five years, and 8.98% since inception.  

Of course, the inverse applies to the funds at the bottom of the list (which I'll leave unnamed). What I will say is that the bottom five funds are all growth funds investing in the kinds of long-duration names that led market gains prior to the 2022 drawdowns. 

1. Talaria Global Equity Fund

Managed Fund
Talaria Global Equity Fund
Global Shares

Talaria adopt a high-conviction, value-oriented process to identify high-quality large-cap companies from around the globe. And it's worked. Over the past decade, the Talaria fund generated an average yield of more than 9% p.a. 

Talaria's key point of difference, though, is its use of derivatives. 

Every stock the firm has ever owned has started life as a put option, which provides an added source of income and helps reduce volatility.

If the stock goes up, Talaria still book the premium as income. If the stock goes down and the buyer of the option exercises their right to sell the shares to Talaria at the agreed “strike price”, then Talaria gets the stock at the strike price minus the premium paid for the contract.

“We do this to lower risk, lower volatility and give us a greater certainty of outcome. So over the life of the fund, this is around 7-7.25% per annum - differentiated income that is independent of any company’s desire or ability to pay a dividend," says Co-Chief Investment Officer Hugh Selby-Smith. 

 2. First Sentier Global Listed Infrastructure Fund

Managed Fund
First Sentier Global Listed Infrastructure Fund
Global Shares

The Fund’s objective is to deliver capital growth and inflation-protected income by investing in a globally diversified portfolio of companies which own or operate infrastructure assets. The Fund aims to outperform the FTSE Global Core Infrastructure 50/50 Index over rolling three-year periods. 

They've certainly achieved that, returning 6.29% against an index return of -4.1%. That's a whopping 10.19% outperformance. 

“We expect public policy support for infrastructure investment to remain strong globally, especially where it relates to the replacement of ageing infrastructure assets, buildout of renewables to help decarbonise electricity generation, and globalisation of natural gas markets,” said Peter Meany, Head of Global Listed Infrastructure Securities.

“We also expect private sector funding of new infrastructure investment to remain strong in 2023 although rising interest rates will likely see M&A activity slow. We anticipate a robust pipeline of capital investment opportunities for the majority of global listed infrastructure companies for the year ahead.”

3. Fidelity China Fund

Managed Fund
Fidelity China Fund
Global Shares

Fidelity's China Fund uses a bottom-up approach to invest in 60-80 companies, with the aim to outperform the MSCI China Index. 

Whereas the index returned -21.93% last year, the crew at Fidelity were able to generate return of 5.23%.

This is a remarkable result given the year the Middle Kingdom has had. China has garnered headlines for its harsh COVID lockdowns, and the investment world has been waiting with bated breath for the manufacturing epicentre of the world to reopen. 

"We anticipate the recovery will not occur in a straight line, with growth acceleration more pronounced in the second half of 2023 and into 2024, meaning China alone is not likely to be enough to offset the slowdown in the other major economies," says Casey McLean at Fidelity International.

4. Janus Henderson Global Natural Resources

Managed Fund
Janus Henderson Global Natural Resources
Global Shares

Resources served as the one shining light in an otherwise dark year. And Janus Henderson capitalised. 

The Janus Henderson Global Natural Resources Fund invests in high quality mining, energy and agriculture companies with flexibility to invest across the supply chain, taking advantage of price shifts between upstream and downstream sectors and across industries.

The fund shoots for a net return that exceeds the total return of the S&P Global Natural Resources Index (net dividends reinvested) in AUD over rolling five year periods. 

Unlike the funds above, Janus Henderson's Global Natural Resources fund underperformed the benchmark - 4.42% against an index return of 17.49%. Still, positive return in the year we've had is not to be sneezed at. 

Looking forward, Janus Henderson's Daniel Sullivan notes that "As global demand rebounds, markets will be faced with low inventories and constrained supply which could drive commodity prices, boosting profit margins and encouraging resources companies to invest in growth and expansion."

"In our view, the natural resources sector remains attractive. It has a P/E ratio of less than 10x, and dividend yields are over 4%. In addition, many companies in the sector have greatly simplified their operating models, have little or no debt, and are experiencing generally elevated commodity prices, high profits and cash flows."

5. Epoch Global Equity Shareholder Yield (Unhedged) Fund

Managed Fund
Epoch Global Equity Shareholder Yield (Unhedged) Fund
Global Shares

The only income fund in the top five, Epoch's fund targets both income yield and capital growth. In other words, total return. 

According to Epoch's John Tobin, it's all about finding companies that can pay a high dividend tomorrow rather than today.

"After all, a high dividend yield can reflect a one-time windfall or be a sign of distress. (Mathematically, the dividend yield will spike as a company's stock price drops.) Dividend-paying companies must be actively vetted for growing cash flow that can be used to sustain and grow dividends and for company management teams that make paying dividends a priority."

Moreover, investing in companies that can return money to shareholders lowers volatility and thus smooths returns through the cycle. 

"Companies with a history of growing dividends tend to be mature and well established in their respective markets, with ample resources to ride out economic downturns. Beyond that, dividends provide a measure of stabilization within a portfolio's total returns."

From a portfolio return perspective, "if your portfolio can generate the same average annual return as the market, but does so with less volatility, you will end up with a higher annualised return than the market."

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David Thornton
Content Editor
Livewire Markets

David is a content editor at Livewire Markets. He currently hosts The Rules of Investing, a half hour podcast where he sits down with leading experts across equities, fixed income and macro.

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