Insinger de Beaufort’s Global Equity fund has offered disappointing returns since its 2002 launch. But following a restructuring, that should be about to change, says co-manager Peter Fitzgerald.Isinger de Beaufort’s Global Equity fund has been managed by Guy Ester since its launch in November 2002. Returns have been disappointing but improved performance is beginning to come through, says Peter Fitzgerald, director at IdB and co-manager since the start of 2005. “We had a big restructure towards the end of last year,” says Fitzgerald. “This included a change to the prospectus. Before August we effectively had to replicate the MSCI World index, which meant a large exposure to the US of about 50%. With investor approval, we now have more flexibility to deviate from the index. We have seen a good turnaround.” Data from Standard & Poor’s appears to back up Fitzgerald’s optimistic view. Based on three-year returns to March 27, the fund is ranked 18th out of 19 funds of funds in the Global Growth sector. But this improves to ninth of 21 when performance is assessed over one year, with a return of 31.54%. The shift away from America has been significant, says Fitzgerald. “We now have no direct exposure to the US,” he adds. “There are two main reasons for this. First, we can find other areas where valuations are more attractive; and second, we think the diversification benefits for UK investors using US exposure are overestimated. They may be aiming for low correlation, but when the US market loses value, so does the UK.” At February 28, about 60% of the fund’s equity allocation was to Britain, with the remainder split evenly between Europe and Asia. The portfolio had nine holdings at the end of February, although there have been some adjustments. “We halved our allocation to Tim Russell [Cazenove UK Growth & Income] two weeks ago,” says Fitzgerald. “The balance has been invested in Standard Life Equity High Income. The switch was designed to increase our equity income portion. We have also added Artemis European Growth. This is being built up as new money comes in. Our target allocation for the fund is about one-third of our European exposure.” Global Equity also holds two funds that have been soft-closed: JOHCM Continental European and Polar Capital Japan. However, the portfolio is still able to invest in these funds in response to inflows. The non-equity portion of the fund, about 5%, is allocated to cash. “Cash does not generally exceed 5-10% of the portfolio,” says Fitzgerald. “It is a short-term allocation while we decide on entry into a new position.” Fund selection decisions are made using quantitative screening, followed by about 300 manager interviews each year. According to S&P, the fund has the lowest price volatility of any in the top 10. This reflects Ester and Fitzgerald’s approach to risk. “Volatility is as low as you can get with a 100% equity portfolio,” says Fitzgerald. “It is generally one of the least volatile funds in the sector and this is a common theme across our fund of funds range.” Stability is achieved through selection of low-volatility funds and by minimising turnover. “We pick our funds carefully. One of the biggest risks is to be too active and to make too many decisions,” says Fitzgerald.