The global equities funds that have consistently outperformed over the long term

Another day, another batting average article - but this time, we're going global. Globally-focused strategies have had a stellar year in FY24, with 57 funds beating the benchmark's return of around 23%. 

Funds like the Frazis Fund, the Loftus Peak Global Disruption Fund, the Munro Climate Change Leaders Fund, and the Orca Global Disruption Fund all shot the lights out during the financial year - all generating returns north of 40%. 

But consistency, as always, is key. For example, while the Frazis Fund delivered investors a return of 81.25% in FY24, its total return annualised over three years is -15.38%. 

So, which global equities funds have consistently beaten the benchmark? 

In this article, we will be assessing the globally-focused equity funds that have the highest batting averages in Australia - across growth, value and blended styles, with the help of the data gurus at Morningstar. 

For context, the funds' "batting average" is calculated out of 100. A manager who outperforms the market in every rolling period during a given timeframe would have a batting average of 100, while a manager who beats the market in half of these periods would have a batting average of 50. 

The benchmark used to calculate the batting average in this case is the MSCI World Ex Australia Index - which has returned 13.12% p.a. over 10 years and 13% p.a. over the five years to June 2024. 

For the five-year performance data, Morningstar calculated the batting average using 1-year rolling periods, stepped monthly. For the 10-year period, the batting average is calculated using three-year rolling periods, also stepped monthly. A rolling calculation was used to mitigate timing bias. 

NOTE: Please drag your cursor across the tables below to see the entire tables. All data below is provided by Morningstar. 

Global Equity Fund Blend - 5 years

Global Equity Fund Blend - 10 years

Global Equity Fund Growth - 5 years

Global Equity Fund Growth - 10 years

Global Equity Fund Value - 5 years

Global Equity Fund Value - 10 years

Breaking down the data with Steven Le from Morningstar

As you may have noticed, most of the funds in the blended category are passive strategies. So, is it worth investing in active funds when it comes to global equities? 

As Steven Le, the Associate Director of Manager Research at Morningstar explains, the MSCI World Ex Australia Index has proven to be a challenging hurdle for active managers to outperform consistently. 

"The efficiency and liquidity of US equities, which dominate the index, has made it an uphill task. Nevertheless, we believe adept active managers can outperform the index, particularly over a full market cycle," he says. 

"The global equity universe is broad, creating opportunity for the skilled active managers to add value." 

You also may have noticed that some funds on this list have generated incredible returns, but the batting average may not be as high. This means that these strategies may be more volatile and/or risky. 

"Investors should assess if their personal circumstances and risk appetite can handle the high volatility associated with these types of strategies," Le says.

"While they may not offer consistent relative outperformance, adopting a long-term perspective is crucial, as it can enable investors to benefit from compounding returns over time." 

For context, anything above 50 can be considered a "good" batting average as this indicates a manager has outperformed the index more often than not - which Le believes is a good result for an active manager. The average batting over 10 years was 21 for value funds, 32 for blend, and 49 for growth. 

A reminder that investors should avoid making any investment decisions based on the data above alone. The batting average measure is far from perfect. It does not calculate the extent of a fund's outperformance or underperformance, nor does it take into account the risk that was taken by managers to receive these returns. It's just a data point in isolation. 

Out of this list of funds, Le points to the Barrow Hanley Global Value Equity strategy, which is the underlying strategy for the Perpetual Wholesale International Share Fund, as one that stands out. 

"While the fund’s track record is not entirely attributable to Barrow Hanley, we believe their pragmatic value approach is executed with consistency and stock-picking prowess, enabling the team to identify companies with attractive valuations that others fail to recognise," Le says.

"We also like the firm’s collaborative culture and sensible succession planning mitigates key-person risk."