Exposure to emerging markets boosts Axa Financial

FUND FOCUS: GLOBAL EQUITIES: Best performer 5YTD:Axa Financial Neptune Global Equity +14.96%

Worst performer 5YTD:

Summit Asset Managers Global G -16.72%

GIVEN THE tumultuous performance of global equities over the last number of years, it may be seen as something of an achievement that Irish funds invested in global equities managed to lose just a little over 1 per cent over the last five years.

According to MoneyMate, Irish gross domestic funds invested in global equities delivered a return of -1.1 per cent on average in the five years to February 22nd, 2011. However, it should be noted that the global equities category encompasses a wide range of fund types, which resulted in a wide variation in performance.

Axa Financial Neptune Global Equity was the best performer, delivering a return of +14.96 per cent over the five-year period. The fund, established in 2001, is a concentrated fund with 40 to 50 holdings. According to Axa Financial, this strategy allowed it to benefit from global exposure and diversification without diluting returns by having too many holdings.

One of the key factors behind its outperformance was its high exposure to outperforming emerging markets. Within this geographic focus, the fund has a strong weighting in IT, a sector that has benefited from emerging market demand, with pioneers like Apple performing strongly.

The lack of exposure to banks, insurers and property in developed markets in 2008 – a decision taken in 2007, according to fund manager Neptune – was also a key factor in its outperformance. While the dramatic de-rating of emerging markets did impact performance during the last quarter of 2008, the fund maintained its overweight position in emerging markets, which became a key driver of performance in 2009.

At the other end of the scale, Summit Asset Managers Global G delivered -16.72 per cent. The fund, which is offered by Irish Life, invests in a small number of large capitalisation stocks across the globe. As large-cap firms tend to be listed in developed markets, the fund failed to benefit from emerging or Asian markets.

Its mandate to invest in large-cap companies also meant the fund had no exposure to small caps, which outperformed globally over the last few years. Irish Life also questioned the categorisation of the fund in the global equity category, arguing that it is more a specialist concentrated fund.