Investing in a Global Income Fund: How to achieve rewarding returns

Highlights:

• A global multi-asset fund invests in companies which are spread across the world, including the country in which the investor resides, while typically, those looking to diversify their portfolio against country-specific risk, yet without excluding their own country, tend to opt to invest in these.
• Current market conditions show increasing rates of inflation globally, making it more bumpy for the traditional bonds and as a result, a global multi-asset fund provides a great opportunity in the ongoing market outlook.
• Looking to invest in a diversified portfolio of bonds and equities? With the aim to provide stable, long-term capital appreciation, the CC Global Balanced Income Fund invests in a range of local and international bonds, equities, as well as other income-generating assets.
• Just as is typical of all funds, global funds too are a convenient and easier way to invest, whereby money from different investors is pooled in together, while they offer diversification.
• These funds may focus on a single asset class or may be allocated across multiple asset classes, while they may invest in any region or country in the world, including developed markets, emerging markets and frontier markets.
• From investing in a large number of securities to offering capital appreciation and an additional income, there are several benefits to investing in a global fund. In addition, funds have the potential to eliminate liquidity risk, while the fact that global funds are managed by a professional fund manager means that you are better equipped to achieving high returns.
• Just as is the case with any form of investment, global funds are associated with certain risks, namely political risks, currency risk, which involves fluctuations in foreign currency and interest rate risk, which can take place when unfavourable changes occur to monetary policy.
• Interested to invest in global companies and gain rewarding returns from across the globe? Get in touch with us to book an appointment with one of our financial advisors.

International investing has increasingly become a vital aspect of our portfolios as we take part in the global growth story and look into expanding our investable universe globally and seek out greater returns. Providing a wealth of benefits and serving as a leading investment option, global funds invest in high growth companies located across the world, helping to mitigate country-specific risks and volatility as they are not restricted to a particular region, while they may help identify top-performing investments that have the potential to generate returns for the years to come.

Wondering how exactly do they work and what do they invest in? Read on to find out how you can achieve rewarding returns from across the globe by investing in a fund.

What is a global fund and what does it invest in?

As its name implies, a global fund invests in companies which are spread across the world, including the country in which the investor resides. These funds may be focused on a single asset class or may be allocated to multiple asset classes, while they can be both actively and passively managed. Typically, investors looking to diversify their portfolio against country-specific risk, yet without excluding their own country, tend to opt to invest in global funds.

A convenient and easier way to invest, funds are popular with both novice and experienced investors alike since money from different investors is pooled together and whereas risk is unavoidable in all asset classes, funds can be a great way to get you going since they offer diversification across a number of different investments. In addition, with a fund, investors can buy into units with underlying net asset value (NAV) as opposed to the fixed price of one bond.

A global fund may invest in any region or country in the world. Investment regions may include developed markets, which represent countries that have mature economies and efficient infrastructures, however, they may also invest in emerging markets. These often provide the greatest opportunity for return seeing that they tend to be one of the fastest-growing economies in the world. Global funds may also invest in what are known as frontier markets, which consist of countries that are more established than the least developed ones (Least Developed Countries – LDCs) but still less established than emerging markets. Some of their main characteristics include the fact that they are generally very small countries, they tend to carry too much inherent risk or are too illiquid to be considered an emerging market.

When the global economy does well, the mix of domestic and foreign investments can work to your favour and news in one country that might drive its market down can be easily offset by other countries whose economies are up and thriving.

If you’d like to find out more about funds, here is a comprehensive guide, explaining how they work, the different types and so much more.

Is there a difference between global and international funds?

While the words global and international are often used interchangeably in the English language, when it comes to investing, there are some key differences between the two. For one, global and international funds have completely different investment goals, while they afford investors different investing opportunities. A major distinction is that an international fund invests only in foreign markets and has no investments in the investor’s home market, offering diversification outside of their domestic investments. What’s more, an international fund may invest in the solid markets of developed countries or it may invest in emerging markets, which are less mature and carry more risk. In contrast, a global fund will invest in all available markets, including the investor’s own country.

Why invest in a global fund?

With the potential to invest in a large number of securities, giving investors a cost-effective way to own assets in many different companies, a global fund can be an important part of a diversified portfolio, while it can help you take advantage of the opportunities presented by the worldwide economy.

Below are some further benefits to investing in a global fund:

Diversification
Global funds typically invest in several individual stocks, in different countries and across a variety of industries, which can increase your chances of diversifying your portfolio. In effect, they can offer investors multiple layers of diversification, such as geographical, sector, currency and others, reducing the chances that the performance of a single stock or asset class or instability in a single country will negatively impact the performance of your entire portfolio and this turn can serve as an important factor when it comes to risk management.

Capital appreciation and income
Global funds have the potential to offer great capital appreciation, even though this increased potential comes with greater risk. Having said that, capital appreciation can be particularly beneficial to those with long-term goals, such as retirement, since this kind of growth potential can be an important driver to helping your savings keep pace with inflation. What’s more, some funds return an income to investors, which can give your yearly earnings a boost.

Liquidity and convenience
Typically, funds enable you to buy or sell fund shares during each business day’s closing NAV, eliminating in this manner any liquidity risk, while any income from dividends and capital gain distributions can be either reinvested or can be kept to make additional investments whenever you see fit.

Professional management
Funds tend to be popular amongst investors because they usually offer access to a ready-made investment portfolio by a professional who has the necessary expertise, technology, global reach and skills needed to research companies and analyse market information before making any investment decisions.

What are the risks involved?

Just as is the case with any form of investment, global funds are associated with certain risks. For instance, the value of investments and any income from them can rise as well as fall. At the same time, there are several factors that can impact the performance of each fund, with the risks largely based on the type of fund you have opted to invest in.

Here are three global investment risks to consider:

Political risk: this involves risks associated with foreign governments and politics. Political unrest or scandals can cause serious consequences to the country’s economy and by extension to investors.

Currency risk: this is usually associated with fluctuations in a foreign currency relative to the U.S. dollar or euro. For example, if a foreign company reports 25% earnings growth, but its local currency depreciates by 10% relative to the U.S. dollar, then the real growth rate is just 15% when the profits are converted back into U.S. dollars.

Interest rate risk: this type of risk can take place when unfavourable changes occur to monetary policy. This can happen if, for instance, an emerging market economy decides that it is growing too quickly and acts to contain inflation by hiking interest rates. This could negatively affect the value of your financial assets if they are priced based on the interest rates.

How to invest in a global balanced income fund

Looking to invest in a diversified portfolio of bonds and equities? With the aim to provide stable, long-term capital appreciation, the CC Global Balanced Income Fund invests in a range of local and international bonds, equities, as well as other income-generating assets. Ideal for those seeking to achieve stable, long-term capital appreciation and for those planning to hold their investment for the medium-to-long term, the Fund offers a diversified investment, while it is actively managed by a professional to ensure the best possible results, offering you some added peace of mind. More specifically, by adopting a flexible investment strategy, the Fund’s asset allocation is adapted and changed based on macroeconomic, investment and technical outlook. Some of the Fund’s main features include:

Income generation: through an optimal strategy, the fund distributes income.

Dynamic positioning: the Fund offers the right flexibility to move nimbly between assets, affording a dynamic positioning that helps capture current opportunities, while rebalancing takes place as market conditions warrant and consistent with the portfolio’s risk profile.

Covering a wide geographical area and with major sectors including, but not limited to, financials, information technology and materials, here are the fund’s top holdings:

COMPANY	WEIGHT %
iShares Core S&P 500	4.4
iShares S&P Health Care	3.0
L’Oreal	3.0
6.75% Garfunkelux 2025	2.9
iShares MSCI World	2.7
4% Chemours Co 2026	2.7
4.75% Banco Santander perp	2.7
Lyxor Euro Stoxx600 Banks	2.7
iShares S&P 500 Financials	2.7
5.299% Petrobas Global Fin 2025	2.6

Below is a snapshot of the Fund’s top three holdings.

iShares Core S&P 500

Offering exposure to large, established U.S. companies, the iShares Core S&P 500 ETF seeks to track the investment results of the S&P 500, an index composed of large-capitalisation U.S. equities. Launched in 2000, it is a passively managed exchange-traded fund, designed to provide a broad exposure to the so-called large cap blend segment of the U.S. equity market. With a heavy allocation in information technology, followed by health care, consumer discretionary and financials, among other sectors, its portfolio contains 505 holdings as of January 27, 2022, with some of the big-names including the likes of Microsoft, Apple, Nvidia, Tesla, Amazon, Johnson & Johnson and others. Large cap companies are considered a more stable option since they tend to boast more predictable cash flows, while they are less volatile than their mid and small-cap counterparts. As for the ETFs performance, according to its prospectus it was up approximately 25.94% last year.

iShares S&P Health Care

Undoubtedly, the COVID-19 pandemic expedited a number of paradigm-shifting transformations within the healthcare industry, with the sector seeing a massive wave of investment and innovation. In 2021 alone, $44 billion was raised globally in health innovation, twice as much as 2020. As its name implies, the iShares S&P Health Care offers a diversified exposure to U.S. companies that operate in the health sector, while it seeks to achieve return on investment through a combination of capital growth and income on the fund’s assets. These reflect the return of the S&P 500 Capped 35/20 Health Care Index, its benchmark index, which is a free float-adjusted market capitalisation weighted index. As a result, the fund does not only provide single country exposure, but also a focus on stocks within a specific sector. Boasting holdings that consist of industry-leaders, some top names include Johnson & Johnson (JNJ), Pfizer (PFE), Abbvie (ABBV), Eli Lilly (LLY) and Merck & Co (MRK), to name a few.

L’Oreal

Founded in 1909, the L’Oréal Group has grown by leaps and bounds, becoming the largest cosmetics and beauty company in the world. In 2020, the company was the leading personal care brand in the world with a brand value that amounted to $29.47 billion, while between 2018 to 2021, the company’s compound annual growth rate (CAGR) is expected to have grown by 11%. The international beauty major has reported a strong rise in sales and net profit for the first half of 2021, with eCommerce and North America performing particularly well in the second quarter. Worldwide sales for the period came in at €15.9 billion, up 16.2% from the previous year, with net profit from after non-controlling interests up by more than 20% at €2.36 billion. Meanwhile, total sales for the second quarter of 2021 tallied up to €7.58 billion, with overall company growth up 33.5%. Its solid financials have resulted in analysts reiterating a Buy rating for the stock, while its strong brand reputation, premium cosmetic products, expanding eCommerce business and significant presence across the world means that L’Oreal is expected to post substantial revenue and earnings, as well as continued market share gains over the next several years.

Interested to invest in global companies and gain rewarding returns from across the globe? Get in touch with us to book an appointment with one of our financial advisors. Alternatively, if you would rather invest in local companies, here is how you can tap into local opportunities by investing in a Maltese fund. On the other hand, if you would like to invest in emerging markets, here is a guide to investing in the drivers of global wealth.

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*The Annualised rate is the average growth of the Fund over one year and is determined as of 31 December 2021 on the return of the Accumulator Class of Shares of the Fund over the preceding 5 years.

The value of the investment may go down as well as up. The performance figures quoted refer to the past and past performance is not necessarily a reliable guide to future performance. The Fund is licensed as a Collective Investment Scheme by the Malta Financial Services Authority under the Investment Services Act, qualifying as a ‘Maltese’ UCITS. Investment in the Fund should be based on the full details of the Prospectus, Key Investor Information Document (KIID) and the Offering Supplement which are available on www.ccfunds.com.mt or may be obtained from the below address. Initial subscription charges apply on investment in the Fund.

Approved for issue by Calamatta Cuschieri Investment Services Limited, Ewropa Business Centre, Triq Dun Karm, Birkirkara BKR 9034. Calamatta Cuschieri Investment Services Limited (“CCIS”) is licensed to conduct Investment Services in Malta by the Malta Financial Services Authority under the Investment Services Act. T&C’s apply.