JM Finn Global Opportunities Fund research update

Kate Marshall | Mon 09 February 2015

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The industrialisation of the developing world, combined with the sustained demands of the West, means the need for energy, infrastructure and raw materials is growing. The recent sharp fall in energy and commodity prices should, therefore, prove advantageous for economies across the globe.

A tumbling oil price should reduce the cost of energy for consumers, while global food prices have also fallen to their lowest level in four years. Indeed, the UN (United Nations) Food Price Index was 9% lower in December 2014 than the year before. With falling living costs putting more money back into consumers' pockets, this could enable an increase in spending on healthcare, education, housing and domestic goods.

Anthony Eaton, manager of the JM Finn Global Opportunities Fund, is seeking to take advantage. His investment process involves identifying trends set to shape future global economic growth. In his view, falling costs could have the greatest impact in the Eastern world, where wages and consumption are rising. As such, the fund largely invests in Western firms which offer exposure to the developing world, while also investing in some companies directly located in emerging markets.

The fund's investments are currently split between three main themes: Western exporters; predominantly US-based healthcare and consumer stocks; and income-generating property and infrastructure assets, mostly based in Asia.

In the case of the former, the fund is focused on businesses located in the euro zone, but which export goods across the globe. The fund's largest holdings include Amsterdam Commodities, which trades and distributes agricultural products across 90 countries, and Nestlé, one of the world's most recognisable consumer brands.

Exposure to healthcare and pharmaceutical businesses has risen in recent years, and now accounts for 14.4% of the portfolio. Across the globe, an increasing number of people are able to afford to remain fit and active for longer - this could create rising demand for health foods, surgical procedures, and medication. While the sector as a whole performed well in 2014, our analysis suggests the manager's stock selection in this area has detracted some value from returns.

Overall, the fund has been through a fairly difficult period compared with the wider global market over the past few years. In Anthony Eaton's view, stock markets have lacked direction for some time now, overly focused on quantitative easing (QE) programmes and the short term, rather than looking at the larger picture. He feels this has presented a difficult environment for the fund, given its focus on wider global themes. However, as QE recedes in some countries, investors may see this as a sign of self-sustaining global economic growth, which could be well-received by markets.

Our view on this fund

This fund was removed from the Wealth 150 list of our favourite funds across the major sectors in January 2014 after our analysis highlighted concerns over the manager's ability to add value through stock selection. Since this time, the fund has delivered a positive return of 5.6%, however, it has underperformed its peers by 3.8% and the MSCI AC World Index by 9.3%*, though this is over a short period and past performance is not a guide to the future.

Past performance is not a guide to future returns. Source: Lipper IM* to 02/02/2015.

Given the fund's approach, its performance tends to be closely linked to that of emerging markets. We continue to believe the long-term outlook for higher risk emerging markets remains robust and the fund could benefit from this over the long term. That said, we currently have higher conviction in other funds in this sector, and our favoured funds currently feature on the Wealth 150.

Find out more about this fund including how to invest

Please read the key features/key investor information document in addition to the information above.