Get rich by going global

ISA savers should not limit themselves to the UK. There are growth prospects all over the world that the shrewd investor can benefit from
Click to follow
The Independent Online

ISA investors are shedding their attachment to the UK stockmarket and broadening their horizons to take in Europe, the US and Asia.

ISA investors are shedding their attachment to the UK stockmarket and broadening their horizons to take in Europe, the US and Asia.

Global growth investment funds are proving increasingly popular, says Justin Modray, investment adviser with Chase de Vere. The global economy is here to stay and ISA investors should consider spreading their wings. "It is a mistake to have all your investments in the UK. Most ISA investors should now be looking for a fairly even split between the UK, Europe and the US."

He says most UK investors prefer to take their first tentative steps overseas by investing on the Continent. "European funds have performed well over the last three or four years. This has encouraged many ISA investors, who feel more comfortable putting their money in a successful sector."

Two of the most popular European funds have been Invesco GT European Growth and Gartmore European Selected Opportunities, which have grown 209 per cent and 140 per cent respectively over the last three years.

The Invesco fund is likely to be more volatile, as its invests largely in riskier technology stocks. Mr Modray recommends the Gartmore fund for those making their first foray into Europe who do not want to take on too much investment risk.

Although Europe has performed strongly, the US is the powerhouse of the world economy. "It is the main driver behind international stockmarkets, yet many UK investors have only a small proportion of their money invested here," he says.

But those who have invested in technology funds may have more US exposure than they realise. "Most technology funds still invest heavily in US companies. Technology shares are high risk, and to balance this you should look for a fund investing in established blue chip companies. I recommend Credit Suisse Transatlantic." The fund has a successful long-term track record and boasts 143 per cent growth over the last three years.

Finally, he recommends Fidelity International as a good starter fund for investors wanting to cover the main global markets in one swoop. "This invests 50 per cent in the UK and the remainder overseas. It gives you all-round exposure."

Darius McDermott, investment director with ISA discount broker Chelsea Financial Services, warns many investors with sizeable PEP portfolios will be overexposed to the UK. PEP rules set strict limits on the amount investors could place outside Europe. ISAs, which replaced PEPs last year, dispensed with these rules and gave investors much greater geographical freedom. "Many PEP investors are currently overweight in the UK and should take advantage of ISA rules to invest in the US and Asia," he says.

A new breed of global growth fund has attracted the spotlight recently, known as global-themed funds. Managers of these funds pick stocks according to whether they believe certain themes, such as technology, healthcare, energy or corporate restructuring, are most likely to fuel investment growth.

The Sarasin Equisar fund follows five themes - e-commerce, technology, energy, pricing power and corporate restructuring. Invesco Global Dynamic Themes, a new fund that has grown 43 per cent over the last 12 months, invests in areas likely to be affected by themes such as the breakdown of world trade barriers and the ageing world population.

Mr McDermott says themed funds aim to have the flexibility to shift into different international sectors. "If technology is going well, a fund may switch into that. If healthcare is all the rage, they will seek growth in that sector."

Another recently-launched fund, Mercury Global Titans, aims to give ISA investors a spread of the major international companies.

Mr McDermott says the two most popular global sectors among investors in recent months have been technology and healthcare/biotechnology funds. "Both are global growth areas, with a large weighting in the US."

Aberdeen Technology and Henderson Global Technology remain favourites among investors who have kept faith with technology. "ISA investors piled into technology at the start of the year, but the sector fell sharply in April. Some investors have been scared away, while others are looking to buy while prices are still low."

The mapping of the human genome has given a major boost to health and biotechnology funds. Most popular is Framlington Health, which grew a massive 232 per cent over the last three years. "There has been a lot of growth in this sector and this has attracted new fund launches such as Schroder Medical Discovery," says Mr McDermott.

Investors looking for growth even further afield should consider Japan, says Andrew Jones, investment partner at the David Aaron Partnership. "This is another major stock market that could not be accessed by PEP investors. There are good opportunities in Japan, but nobody is certain when it will start growing again." When its stockmarkets do eventually recover, returns over the long term could be excellent.

Mr Jones recommends Martin Currie Japan and Save & Prosper Japan Growth, which have grown 68 per cent and 153 per cent respectively over the last three years.

Looking for credit card or current account deals? Search here