Five global equity funds that are likely to outperform

62 funds are rated Gold; we look at five of these that also have five stars.

Ruth Saldanha 19 November, 2018 | 6:00PM

The S&P/TSX Composite Index has fallen more than 4% for the year to date. Other markets have done a lot better, especially the United States. For Canadians looking to diversify outside local markets, U.S. markets are the next logical choice.

Last week, we talked about five U.S. equity funds that could outperform.

But for those looking beyond the U.S., Global Equity mutual funds, which have an exposure to U.S. equities as well as other international equities, could be a good choice. This week, we take a look at the Global Equity mutual fund category, focusing on those that have a Gold rating according to Morningstar's Quantitative Rating system. The forward-looking rating picks funds that are likely to outperform in the future, based on various metrics including price, portfolio and performance.

There are a total of 2,714 funds in the Global Equity category, of which 494 are medalist funds. Of these, 62 are Gold-rated.

Here are five of the Gold-rated funds that also earn a 5-star rating for their past risk-adjusted performance:

Name Morningstar Rating Quantitative
Rating
10-Year
Total Return
CI Black Creek Global Leaders Class F 5 Gold 12.99
Dynamic Global Dividend Series F 5 Gold 12.28
Manulife Tax-Managed Growth F 5 Gold 11.47
Capital Group Global Equity Canada F 5 Gold 12.67
TD Glbl Entertainment & Comm - F 5 Gold 19.87
Source: Morningstar. Data as of Oct. 31, 2018

CI Black Creek Global Leaders has over $3 billion in assets under management. The fund invests around 38% of its holding in U.S. equity, and around 59% in international equity. Of its international holdings, a majority are in European stocks, though it has some holdings in the United Kingdom, Mexico, China, Japan and India. The top five holdings account for around 26% of its portfolio. The fund has a slightly higher than average standard deviation, but has also delivered above-average returns. In terms of sectors, it is heavily overweight on industrials and basic materials.

Dynamic Global Dividend has close to 60% of its holdings in U.S. equity, and around 36% in international equity. It also holds 7.72% of its overall $2.1 billion in Canadian currency. The fund usually invests in large-cap companies and is overweight on healthcare, basic materials and industrials. The fund has an above-average standard deviation, but has also delivered significantly higher returns. Almost all of its international holdings are in European equity, and among those, a majority of its holdings are in Swiss stocks. The Morningstar Switzerland index is down close to 4% in Canadian dollars year to date, while the S&P 500 is up close to 8% for the same time frame.

Manulife Tax-Managed Growth holds mostly large-cap stocks, with around 48% of its $2.5-billion portfolio in U.S. equity and another 40% in international equity. It has a lower-than-average standard deviation and a slightly higher-than-average return. The fund is heavily overweight on financial services and basic materials. Since 2009, it has been managed by Jim Hall and Paul Moroz. Of its top 25 holdings, a majority are in U.S. equity, followed by European equity. It also holds some Canadian stocks.

Capital Group Global Equity Canada has 50% of its portfolio in U.S. equity and another 39% in international equity. It has over 230 holdings, with the top 10 holdings accounting for a little under 14% of its overall $6.6-billion portfolio. The fund has lower-than-average standard deviation but has returned much higher than average. It is overweight on technology and consumer cyclicals, and is underweight on financial services and industrials. It has more than 7% of its portfolio in Japan, and a little over 3% in emerging Asian economies.

TD Global Entertainment and Communications invests mostly in large to giant cap companies. Over 80% of its $662-million portfolio is in U.S. equities, and it focuses mainly on consumer cyclicals, communication and technology. It is a high-risk, high-return fund. Almost all of the FAANG stocks are in its top 10 holdings. The top 5 holdings --  Amazon.com (AMZN),  Alibaba (BABA),  Facebook (FB),  Booking Holdings (BKNG) and  American Tower Corp. (AMT) -- account for almost 40% of its portfolio.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar Rating
Alibaba Group Holding Ltd ADR182.51 USD1.14
Amazon.com Inc1,793.64 USD-1.53
American Tower Corp225.56 USD-0.66
Booking Holdings Inc2,031.57 USD-1.31
Facebook Inc A189.88 USD-0.14

About Author

Ruth Saldanha  Ruth Saldanha is Senior Editor at Morningstar.ca