This month’s profile of Harbor Global Leaders (HGGIX) mentions “the top 10” global large-cap funds on several occasions. The argument for such funds is simple: in steady rising markets, almost – but not quite – everyone gets to win. In stagnant or declining markets, almost – but not quite – everyone suffers. Index funds work best when they can cheaply and efficiently capture the gains offered by rising markets. Concentrated growth funds hold out the prospect of identifying the small fraction of companies that can grow even when the world doesn’t. Those are companies that can:
- take market share from competitors,
- disrupt established industries (channeling Joseph Schumpeter’s famous celebration of “the gale of creative destruction … that continuously revolutionizes the economic structure from within, incessantly destroying the old one, incessantly creating a new one”), or
- charge premium prices because they offer something essential and irreplaceable.
Because the Harbor team came on board in March 2017, roughly 3.6 years ago, we focused on the funds in the Lipper global large-growth category with the highest risk-adjusted returns. For this screen, we sort by Sharpe ratio, the most common measure of risk-adjusted-performance. Here’s the list we constructed.
|Annual returns||Maximum drawdown||Standard deviation||Sharpe ratio||MFO rating||M-star rating||Great Owl||FundAlarm rating||Minimum invest.|
|Artisan Focus ARTTX||24.0||-14.5||14.5||1.55||5||4 star||Yes||$1000|
|Baillie Gifford Long Term Global Growth 2 BGLTX||35.1||-18.3||23.2||1.45||5||5 star||Yes||Honor Roll||institutional|
|Fidelity Flex Large Cap Growth FLCLX||29.0||-17.6||21.2||1.29||5||5 star||Yes||Not available|
|PGIM Jennison Global Opportunities PRJAX||27.5||-15.6||21.1||1.23||5||5 star||Yes||Honor Roll||$1000|
|Polen Global Growth PGIRX||20.4||-14.1||15.5||1.22||5||5 star||Yes||$3000|
|Virtus SGA Global Growth SGARX||19.5||-14.9||16.2||1.10||5||5 year||Yes||$2500|
|Gabelli Global Growth AAA GGGAX||19.1||-14.6||16.4||1.07||4||5 star||No||Closed?|
|Columbia Select Global CGEZX||17.9||-14.5||15.4||1.06||5||5 star||No||$2000|
|Fidelity Flex Opportunistic Insights FFPIX||21.7||-16.2||19.0||1.06||5||3 star||Yes||Not available|
|Harbor Global Leaders HGGAX||19.1||-18.8||16.8||1.04||5||5 star||No||$2500|
Highlights from the list
The MFO rating column reflects risk-adjusted returns only for the three years in question. MFO ratings are calculated using a more-conservative measure than Morningstar ratings. In particular, they target a Martin ratio – which is much more sensitive to downside performance – than the usual Sharpe ratio. For a fund to receive a “five” rating from MFO means it was in the top 20% of its peers based on a very risk-sensitive measure.
The Morningstar rating assesses a fund’s performance based on a weighted average of its 3-, 5-, and 10-year records. That becomes a bit sticky for the fund has been around for 10 or more years, but the management team has not. That the case with Harbor.
The MFO Great Owl rating reflects consistently excellent risk-adjusted returns for the entire life of the fund. If a fund has been designated a Great Owl and it has been around for 20 years, then it had to be in the top 20% for the past three years and the past five years and the past 10 years and the past 20 years!
The FundAlarm rating asks a simpler question: were your total returns (not risk-adjusted) in the top 20% of your peer group for the past 1, 3 and 5 year periods? If the answer is “yes, yes, yes!” then you make the Honor Roll. FundAlarm ratings are only assigned if a fund is at least five years old.
Four of the top ten funds are not available to ordinary mortals. The two Fidelity funds are used with clients of Fido’s managed portfolio service, the Baillie Gifford fund is for institutional investors and Gabelli is flagged as “limited” (aka “closed”) by Morningstar but not on the Gabelli site. Sadly, live Gabelli representatives are not available by phone.
Artisan Focus (formerly Artisan Thematic) is an outlier because it is not a “global” fund, despite Lipper’s assignment to that box. Over 90% of the current portfolio is invested in US-domiciled firms.
The appeal of concentrated, global growth funds is that they offer the prospect for finding Investors looking for a global growth fund should target funds that have clearly articulated philosophies about managing risk, and a record of success across different market conditions.