Lynn Bolin, Head of Communications at M&G Investments
Artificial Intelligence (AI) could be the secret ingredient in successfully investing in global equities. This is because of the ability of AI algorithms to mine millions of data points and analyse them with greater speed and efficiency than humans ever could. The M&G Investments team is successfully combining their own global expertise with the power of AI to drive the investment engine that sits behind both the M&G Global Equity and Global Property Funds.
The global equities universe is vast: over 8,500 companies need to be analysed. AI helps the fund managers choose the optimal global assets, where the aim is to provide investors with capital growth over the long term by investing in a well-diversified portfolio of around 100 global stocks. The funds form part of our offshore range, which also includes the M&G Global Balanced Fund, M&G Global Inflation Plus Fund and M&G Global Bond Fund, and they are offered in South Africa on major investment platforms.
It’s important to look globally
Gaining exposure to companies beyond the local landscape of the JSE (which only represents about 1% of the global equities universe) is important for achieving an optimal risk/return balance in a portfolio. By holding offshore investments, you gain access to diverse companies, geographies and sectors – those that aren’t represented locally, like alternative energy or biotechnology. This diversification both reduces portfolio risk and enhances return potential at the same time. A financial adviser can assist you in deciding an appropriate weighting of global assets in your portfolio depending on your investment goals. They can also help avoid any duplication within your JSE-listed and offshore investments and guide you in choosing the most suitable unit trust funds, which are an easy way to get offshore exposure.
The M&G Global Equity and Global Property Funds are US dollar-denominated, but should you want to invest using rands instead, the M&G Global Equity and Global Property Feeder Funds provide exposure to the same underlying holdings as their US dollar counterparts, but units are priced in rands. This way, investors don’t need to personally expatriate rands, and they receive rands when selling their investments.
How AI brings the global equity universe within range
AI vastly broadens the scope of investment opportunities, helping to solve the biggest problem for asset managers: identifying companies that are most likely to significantly outperform the market.
Consider that a traditional global active manager with a research team and dedicated analysts might have a ‘watchlist’ of around 300 companies, ranking them on various criteria and analysing their “investability” according to the manger’s specified characteristics. There are, however, over 8,500 listed companies around the globe, so it’s very difficult to consider them all in depth. Equally, excluding any could mean missed opportunities.
Using AI provides a global view as it enables a fund manager to scan for those companies that have the most potential. The use of AI in our Global Equity and Property Funds sets M&G Investments apart and helps us to make sense of the patterns associated with global financial data and share price movements, which of course are changing continually. Every week the fund managers re-balance the funds to account for these movements, making for very actively managed portfolios.
There are many steps within the (human) team to get to the final stock selection once the AI results are in. Importantly, the fund managers ultimately make the final decisions, ensuring they keep a close eye on any changes that might be needed in the holdings. This combination of machine-learning and human expertise has delivered superior returns over time, including when there was extreme market stress such as the impact of the Covid-19 pandemic in early 2020.
Enhance your equity investment exposure
Managed by M&G Investments from London, the Global Equity and Property Funds are ideal for investors seeking long-term capital growth. These funds require a longer-term investment horizon of seven years or longer in order to weather the higher market volatility associated with these asset classes, while also offering patient investors potentially higher returns than other asset classes. The M&G Global Equity Feeder Fund has consistently delivered returns above its ASISA category average over time, returning 14.8% p.a. over the 10 years to 28 February 2023 versus the category average of 13.6% p.a., and 14.1% p.a. for the 5 years to 28 February 2023 compared to 13.2% from the average fund in its ASISA category.
For more information on investing with M&G Investments, please feel free to contact our Client Services Team on 0860 105 775 or email us at firstname.lastname@example.org.