Premier Global Power and Water Fund (renamed Premier Global Infrastructure Fund)

In the global sector this fund is likely to appeal to investors looking for a globally diversified fund with low volatility.

For new investors choosing the right sector or country can be daunting. Often they are drawn to the best performers, and those being advertised. This strategy could work but the reverse is also true with investors being disappointed because they haven’t fully understood the investment strategy.

We have reviewed several Global Growth and Income Funds. Some have a heavy bias to the US, some are more globally diversified and some like Baillie Gifford Global Discovery and Scottish Mortgage are more suited to higher risk investors.

For investors moving back into equities a global fund may be appealing because of the diversified nature of the holdings. However, any equity based investment will have a degree of volatility. There is always confusion around risk and volatility, risk is the permanent loss of capital whereas volatility is how the fund might move either in a positive or negative direction. Cash is close to zero volatility but there is considerable risk at the moment where the real returns are negative (therefore there is a loss of capital in real terms), bonds tend to be below 10% and equities above.

So for those needing access to money then cash is likely to be the best choice, whereas those prepared to sit and wait, historically, equities tend to offer the better long term returns but the movement in asset values can test the most patient investor.

For the funds we have reviewed the volatility between them ranges from 10% on the low side to over 17% on the high side. If you look at the performance of the more volatile funds this is greater than the funds with lower volatility, and therefore although the potential returns might be appealing the volatility might not! (Past performance is not an indicator of future returns)

The Holy Grail for investors has to be a fund with low volatility but with the ability to capture greater upside growth. The index fund we use as a benchmark has volatility around 8% and has been able to capture significant upside over the short term; over the long term active funds have proven their ability to significantly outperform.

In reviewing funds, the Premier Global Power and Water Fund has come onto our radar. It is not necessarily one that we would consider for two reasons, firstly long term performance has been patchy and its name appears slightly misleading. My initial thoughts were that this was an Ethical Fund and because of the long term performance, performance was compromised to fit an ethical mandate.

Upon meeting the manager, several things became clear – firstly the new management team have only been running the fund since 30 June 2012 and performance from this point has been strong, secondly this is not an ethical fund and performance is not being compromised, thirdly this is a truly global fund (albeit focusing on one sector) and fourthly the volatility is low at around 8%.

For these reasons we think it is a fund worthy of consideration for investors and in this update we want to explain more about the style of management and what the fund aims to achieve.

Note: The fund was renamed in October 2014, it is now called the Premier Global Utilities Income Fund. The name was further changed in May 2017 to the Premier Global Infrastructure Fund.

Fund Facts Morningstar

Notes

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