Good Value Major Market Fund
Many investors have been panicking recently but value investors see this as a better time to find good value.
To help readers large and small we recently began tracking several portfolios beyond the six we created and track with Jyske bank.
One of these portfolios is the State Street Global Advantage Major Markets High Value Fund. Our friend Michael Keppler, the value statistician and expert is this fund’s advisor. This is a top performing fund that invests only in the major equity markets that Keppler determines are best value. The fund is based in Luxembourg that accepts investments as low as $5,000.
US citizens and residents are restricted but we can all still learn form this funds performance…and that in this courses is our goal.
Here is a review of 2007 performance of the State Street Global Advantage Major Markets High Value Fund.
The fund returned 2.1% in euros in 2007. This compared with a -1.7% drop in the Morgan Stanley Capital Index World Index. In other words the fund out performed the index by 3.7% in terms of euros.
The fund rose 13.2 % in US dollars versus 9.1% for the MSCI World Index for an out performance of 4.1%.
The managers wrote about 2007:
“Buoyed by robust global economic growth and strong corporate profits, the developed equity markets posted strong gains at the beginning of 2007.
After a sharp correction in February/March, triggered by a sell-off in the Chinese stock market, signs of rapid deterioration in the U.S. sub prime mortgage market and concerns about weakening lending standards in private equity deals and leveraged buyouts, some of the major markets continued to climb to new yearly highs through the end of July. However, a deepening of the sub prime mortgage crisis, significant bank losses in the U.S. and overseas, evaporating liquidity in global credit markets and inflation concerns wreaked havoc in many developed equity markets and caused extreme volatility in the second half of 2007.
The MSCI World Index ended the year 1.7 % below its level at the beginning of the year.
The Global Advantage Major Markets High Value, which invests in the most attractive developed equity markets around the world according to our quantitative value strategies, reached a new all-time high of EUR 2,489.34 on June 1.
However, despite its inherently defensive strategy, the Fund did not emerge unscathed from the market turmoil in the second half of 2007.
In a year marked by high volatility, the Fund nevertheless delivered a total return of 2.1% in euros and 13.2% in USD), outperforming the MSCI World Index by 3.7% in euros and 4.1% in dollars.
2007 was the ninth consecutive year in which the Global Advantage Major Markets High Value exceeded the benchmark MSCI return.
Over the nine years from 1999 to 2007, the Fund beat its benchmark by over 9 percentage points per year on average after all costs — an impressive outperformance.
Remarkably, these excess returns were achieved without assuming correspondingly higher risk. To the contrary. From inception of the Fund in May 1993 through the end of 2007, the expectation of a monthly loss was 1.2% compared to 1.5% for the MSCI World Index.
During the same period, the standard deviation of monthly returns — a less appropriate risk measure in our view — was 4.2 % compared to 4.5 % for the benchmark index.
Since inception in May 1993, the Global Advantage Major Markets High Value delivered a compound annual return of 10.9% compared to 7.6% for the MSCI World Index.
The risk-averse nature of the Global Advantage Major Markets High Value was highlighted in a study undertaken by the Lipper Fund Rating Agency at the request of e-fundresearch.com in early 2007.
Lipper screened all global equity funds registered for distribution in Austria with a minimum track record of ten years to identify funds that had outperformed the MSCI World Index over the 10 years through December 31, 2006 with a “bear beta” of less than one versus the Index.
A ”bear beta” of less than one means that the fund beat the benchmark in bear market environments over this 10-year period.
The Global Advantage Major Markets High Value was one of only 12 funds (= less than 3% of a total of 406 global equity funds registered for distribution in Austria at year-end 2006) that met this requirement.
It outperformed the benchmark by an average 7.4 percentage points p.a. over the period in question and was the only fund among the 12 “bulwarks for stormy markets” that had a “bull beta” greater than one.
This means that not only did the fund lose less during bear markets but it also gained more during bull markets.
Based on the Lipper study, Top-Gewinn — a widely read Austrian financial magazine — dubbed the Global Advantage Major Markets High Value as one of the “most stable equity funds in the world,” and e-fund research described it as a “particularly easy-on-the-nerves outperformer” in an e-fund journal
article of January 29, 2007 entitled “Equity Funds for Scaredy Cats.”
In another study, commissioned by the German regional newspaper Rheinische Post in January 2007, that compared the 3-year performance (through Dec 31, 2006) of all funds registered for distribution in Germany , the Global Advantage Major Markets High Value was ranked second in the Global Equities category, based on 3-year excess risk adjusted returns (“alpha factor” calculated by Lipper).
Twelve global equity funds that beat the MSCI World Index over the past 10 years with a low bear beta.
Although the Global Advantage Major Markets High Value outperformed its benchmark again by a wide margin in 2007, the Fund has lately lagged some of its peers, in part because many competing global equity funds have substantial emerging markets allocations.
As its name implies, the Global Advantage Major Markets High Value invests exclusively in developed equity markets.”
This review shows that when one look for good value performance and safety can be enhanced.
Until next update,
Good global investing.
Join Merri and me in Sunny Ecuador . Enjoy the renovations we are continually making at our colonial inn El Meson de las Flores . Here is the new balcony look we have added this year.
We’ll base the coastal tour around this Ecuadorian coastal town Manta.
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