Investors are shifting their focus to global equity funds from domestic equity funds following concerns over President Trump’s ability to implement his pro-growth economic proposals. According to Investment Company Institute’s latest fund flow report, stock funds investing globally have registered the best inflows since April 2015. In contrast, domestic equity funds have registered significantly strong outflows over the last few weeks.
Moreover, recently released economic data indicates that the world’s major economies, including China and Europe are gradually picking up pace. Given their bullish economic backdrop, these countries offer lucrative investment propositions. Global mutual funds are excellent options for investors looking to widen exposure across countries and might be a sensible investment option.
Global Equity Funds Post Best Inflows Since 2015
As per the latest Investment Company Institute (ICI) weekly fund flow report, domestic equity-based funds have recently seen heavy outflows, whereas global equity funds continued to attract investors. In the week ended May 10, equity funds reported inflows of $7.243 billion. While domestic equity funds witnessed outflows of around $991 million, international equity funds saw inflows of $8.234 billion.
According to Lipper’s weekly fund flow report for the same period, equity fund flows remained mixed last week. Total inflows in international equity funds reached $4.810 billion, registering nine consecutive weeks of gains. Meanwhile, domestic equity funds posted outflows of $6.045, posting third straight weeks of declines.
Why Buy Global Equity Funds?
If selected carefully, global mutual funds have the potential to offer secure and attractive investment opportunities. Different studies over the years have shown that a portfolio with both domestic and foreign securities helps in reducing risk while enhancing returns. Also, a steady decline in U.S. equity funds demand might encourage investors to consider diversifying their investments throughout the globe.
Separately, China and Europe have reported encouraging economic data recently.For instance, China’s GDP rose 6.9% in the first quarter of this year, marginally better than prior quarter’s increase of 6.8%. The world’s second biggest economy registered its quickest GDP growth since 2015.
Additionally, retail sales and factory output data remained upbeat in April. According to the National Bureau of Statistics, retail sales rose 10.7% year over year, relatively better than a rise of 10.1% in the previous year. Industrial production also increased 6.5% year over year, which is better than a rise of 6% registered in the prior year.
Moreover, Europe’s GDP is expected to increase about 2% after growing 1.7% in 2016. Meanwhile, growth in U.S. GDP is expected to expand 1.6% this year. Overseas, purchasing managers’ indices are strong, with Germany’s at a six-year high. The key economic metric of productivity is also increasing at a faster pace in Europe than in the U.S. (Read More: Europe Equities Are Hot Now! Grab These 5 Foreign Stocks)
Buy These 5 Global Equity Funds
With investors still fretting over Trump-led uncertainty, equity mutual funds with strong exposure to international markets have emerged as prudent investment options. According to Morningstar, the world stock mutual fund category posted three-month, year-to-date (YTD) and one-year returns of 5.5%, 11.9% and 18.3%, respectively.
This encouraging backdrop calls for investors’ attention to five global equity mutual funds that boast a Zacks Mutual Fund Rank #1 (Strong Buy). Moreover, these funds have impressive year-to-date (YTD) and one-year annualized returns. They also have minimum initial investment within $5000 and low expense ratios.
We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.
Invesco European Small Company A (ESMAX - Free Report) invests the lion’s share of its assets in equity securities of small-cap European companies. Small-cap companies are those whose market-cap is similar to companies included on the Russell 2000 Index. ESMAX mostly invests in depositary receipts and equity securities.
ESMAX has an annual expense ratio of 1.40%, which is below the category average of 1.44%. The fund has YTD and one-year returns of 18.3% and 25.3%, respectively.
JPMorgan Intrepid European A (VEUAX - Free Report) invests a bulk of its assets in equity securities of European companies, with a key focus on those that are based in Western Europe. The fund may try to manage its cash flows effectively by utilizing exchange-traded futures.
VEUAX has an annual expense ratio of 1.42%, which is below the category average of 1.44%. The fund has YTD and one-year returns of 16.2% and 20.9%, respectively.
Oppenheimer Global Y (OGLYX - Free Report) invests heavily in common stocks of both domestic and foreign companies. OGLYX focuses on investing in foreign securities, which include those from developing and emerging markets.
OGLYX has an annual expense ratio of 0.90%, which is below the category average of 1.11%. The fund has YTD and one-year returns of 17.7% and 27.9%, respectively.
Matthews China Investor (MCHFX - Free Report) invests the major portion of its assets in preferred and common stocks of companies based in China and Hong Kong. MCHFX seeks appreciation of capital for the long run.
MCHFX has an annual expense ratio of 1.18%, which is below the category average of 1.33%. The fund has YTD and one-year returns of 23.5% and 43.9%, respectively.
Vanguard Global Equity Investor (VHGEX - Free Report) uses bottom-up stock analysis to invest a large share of its assets in equities of companies all over the globe. It invests in both “growth” and “value” companies irrespective of their market capitalization.
VHGEX has an annual expense ratio of 0.51%, which is below the category average of 1.11%. The fund has YTD and one-year returns of 12.4% and 21.9%, respectively.
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