Trustnet examines the 10 active global funds with less than £100 million in assets under management.
Smaller funds can be more flexible and take advantage of market volatility in a way that is difficult for larger and therefore more rigid competitors to match. The big disadvantage, however, is that they often cost more.
With less money under management, firms typically raise costs to make the portfolio profitable, while larger funds can lower their prices thanks to economies of scale.
For example, Nick Wood, head of fund research at Quilter Cheviot, considers funds with less than £100 million in assets under management (AUM) to be underperforming.
He said funds with less than £100 million in assets are “too small” for institutional investors to consider as they typically do not want to own such a large percentage of a fund, which is a blocker for these funds to grow and acquire enough assets to start lowering prices.
And this is confirmed by the numbers. The average fund in the IA Global sector (including passive funds) charges around 0.8% in ongoing fees. For ‘sub-scale’ funds this increases to 1%.
However, there are exceptions to the rule. So below, Trustnet highlights the 10 cheapest active funds in the IA Global sector with less than £100m in AUM.
Source: FE Analytics
At £91.4 million and with an ongoing charges figure (OCF) of 0.23%, the Invesco Global Ex UK Enhanced Index (UK) is the cheapest sub-scale fund in the IA Global sector.
The fund has been managed by Georg Elsäesser since 2021 and by Michael Rosentritt since 2023 and is based on a systematic, factor-based investment process focusing on momentum, quality and value.
Relative risk is managed using an analytical tool that recommends trades to increase portfolio exposure to selected stocks within defined risk and return parameters.
The managers also limit risk at the country, sector and industry level when constructing the portfolio. For example, the fund is slightly underweight technology and the US relative to the benchmark, but marginally overweight financials and Japan.
Fund performance over 3 years and 10 years versus sector and benchmark
Source: FE Analytics
The fund has outperformed both the IA Global sector and the MSCI World over one, three, five and ten years.
Next up is the £3.4m Liontrust GF International Equity Fund, which has an OCF of 0.25%. A distinguishing feature of this fund is that it excludes the US from its investment universe and seeks opportunities in Japan, emerging markets and Europe.
While the fund has no exposure to US tech giants, it retains a significant allocation to the information technology sector through companies such as Taiwan Semiconductor Manufacturing Company, Keyence and Mercadolibre.
However, consumer discretionary remains the largest sector weighting in the portfolio, including positions such as China’s Trip.com and India’s MakeMyTrip.
Fund performance since launch versus sector and benchmark
Source: FE Analytics
Since launch, Liontrust GF International Equity has slightly outperformed its benchmark but has significantly underperformed its peer group, largely because its mandate limits investments in the narrow cohort of US technology stocks that have driven the market in recent years.
Another fund that is among the 10 cheapest global funds with less than £100 million in assets under management is IQ EQ Low Carbon Equity, managed by Des Flood. The fund invests in companies that are considered leaders in tackling climate change within their respective sectors, with companies such as Microsoft, Quanta Services and Siemens among the top 10 holdings.
It also excludes companies that profit from the exploration, extraction or combustion of fossil fuels.
IQ EQ Low Carbon Equity was launched in 2018 and ranks in the third quartile of the IA Global sector over five years. However, it has demonstrated lower levels of downside risk over the same period, as evidenced by its maximum drawdown score of -14.3%, placing it 49th out of 405 in the IA Global sector. This compares to the benchmark’s maximum drawdown over the same period of -15.7%.
Fund performance since launch versus sector and benchmark
Source: FE Analytics
Storebrand Global ESG Plus Lux, managed by Henrik Wold Nilsen, also follows a fossil fuel-free investment approach, but takes into account additional environmental, sustainability and governance (ESG) criteria and sustainability factors.
Invested companies must have a high Storebrand sustainability rating and be aligned with the UN sustainability goals. In addition, the fund invests up to 10% of its assets in companies related to clean energy, energy efficiency, recycling and low-carbon transport.
Fund performance over 3 years and 10 years versus sector and benchmark
Source: FE Analytics
Next, the £45.6m Stewart Investors Worldwide Leaders Sustainability fund charges investors 0.55% – one of the higher figures on the list, but still well below the average cost of the IA Global fund.
The fund is managed by FE fundinfo Alpha Manager David Gait and Sashi Reddy and invests in large and mid-caps in both developed and emerging markets. For example, India has the second largest country weighting in the fund after the US, with Indian company Mahindra & Mahindra as the largest holding.
Gait and Reddy want to invest in high-quality companies that are positioned to both contribute to – and benefit from – sustainable development. They rate companies on three measures: quality of management, quality of the business and quality of the company’s finances. The fund is in the second quartile of the IA Global 10-year and five-year sectors, as shown in the chart below.
Fund performance over 3 and 10 years versus sector and benchmark
Source: FE Analytics
Finally, the £5.3m IFSL Marlborough Global SmallCap charges investors 0.56% for exposure to small and mid-caps around the world.
A smaller fund can be beneficial when investing in small caps, with experts previously suggesting a preferred size of £60 million to £200 million for small cap funds.
However, IFSL Marlborough Global SmallCap is more focused on midcaps, which make up 60% of the portfolio.
The industrial sector represents over 50% of the portfolio and is therefore the largest sector weighting, while the US accounts for 55% of the portfolio (the largest country exposure).
Fund performance since launch versus sector and benchmark
Source: FE Analytics
Since launch, the fund has outperformed both the IA Global sector and the benchmark, despite a period when megacaps were more liquid and resilient.