Which offshore funds should be on your radar?

Joanna Faith asks fund of fund managers to recommend their top offshore vehicles.

In April, the IMA added offshore funds to its main sector classifications. Originally 71 offshore funds were admitted across 17 sectors, with the majority falling into the Specialist sector. This figure has now soared to 103, with 50 more awaiting final approval.

At the time of launch, IMA director of markets Jane Lowe said the inclusion of offshore funds into IMA sectors was a natural evolution for the classification system and took account of the intended flexibility for distributing European funds.

But with so many new funds being added to the comparison tables, are there any that stand out from the pack? We asked some top fund of fund managers to pick their favourites.

John Husselbee, of North Investment Partners, says over the years the IMA’s classification of funds has improved, and while the new categorisation does not change the investment universe, it does bring a wider range of funds to a larger audience. He says: “In line with the theme of globalisation, investors want to see other funds.”

From the IMA’s list, Husselbee favours JP Morgan Asset Management’s range of funds. The group has 25 on the current roll call.

“Offshore suits them,” he says. “They have 120 SICAVs compared to 30 OEICs. Their Global Convertibles fund and Global Focus fund bring to the fore strategies and asset classes that are not available in their OEIC range.”

Husselbee also rates the Schroder ISF Global Inflation Linked Bond fund and Schroder ISF Global Managed Currency fund.

Meanwhile, Gary Potter, multi-manager at Thames River Capital, owns the Schroder ISF Global Dividend Maximiser fund.

He says: “With concerns over sterling, investors want something more global. Schroder utilises its capabilities across the group. It takes the best ideas and uses a covered call strategy.”

He also likes the Schroder ISF Global High Yield fund, run by Wesley Sparks, who is based in the US. Although Potter doesn’t own the fund, as he has other high yield funds in his portfolios, he has met the team and rates them highly.

Income with flexibility

Potter also owns the Investec GSF Global Strategic Income fund, run by John Stopford. He says the proposition exploits the group’s capabilities across emerging market debt and currency credit.

He says: “There is some value in a co-mingled product. It mixes John’s skills with the best ideas from the currency team, the credit team and the emerging markets team. It provides income with flexibility.”

The Martin Currie GF – Global Resources fund is another of Potter’s recommendations. He says the commodities sector has had a good run, but he particularly rates the capabilities of managers Chris Butler and Duncan Goodwin.

Although Potter doesn’t own the vehicle, he says if he had an allocation to resources it would certainly be on the reserve list.

David Coombs, Rathbones’ investment director, favours the Templeton Emerging Markets Smaller Companies fund. He says the group has a massive franchise in global emerging markets and huge resources on the ground.

“For a smaller companies fund in emerging markets, I think you need to have people on the ground. Templeton is one of the few houses digging down into stocks. We didn’t necessarily pick the fund based on best performance,” he says.

Coombs also rates the Baring Russia fund. He says manager Ghadir Abu Leil-Cooper has always run the fund without hugging the benchmark and travels extensively to the region. He likes the fact she is Eastern European so understands the culture and has such a good track record.

Although advisers are positive about the addition of offshore funds to the IMA universe, there are still some concerns which need addressing.

Potter is concerned with the limited number of funds on the list.

“There is no representation from First State for example. It doesn’t make sense to add funds in fits and starts. There are loads more accessible to UK investors,” he says.

Coombs agrees: “The IMA needs to add all funds registered for sale in the UK so the list is exhaustive.”

He says the association needs to redefine its structure as there are insufficient classes and the addition of offshore funds will make many of the existing classifications too broad.

“The absolute return universe needs a complete review and we have had to classify our multi-asset funds in the Unclassified sector as we can not find a suitable universe,” he says.

The fact many offshore funds have different base currencies also needs to be addressed, Coombs adds.

The IMA says it will launch a further phase of submissions in Q4.