Skip to main content
number cruncher

What are we looking for?

Gold medalists in global equities.

The screen

With a fresh year ahead of us, investors are likely still feeling the effects of last year’s roller coaster in equities. Though inflation continues to be a challenge in many markets, China’s reopening might draw the interest of institutional investors from abroad. No one has a crystal ball in terms of what to expect from global equities this year, but Morningstar’s analyst team has a fairly good idea of which fund managers will continue to produce excess returns on an after-fee basis. Our analysts consider three main pillars when assessing a fund’s potential to produce superior risk-adjusted returns in the future:

1) People: the quality of the management team, including their tenure, experience, team turnover, and general alignment with investor interests.

2) Parent: the overall stewardship of the parent company. Is the fund company truly producing products that will help investors get to their financial goals, or opening/closing faddish products that generate the most revenue for the firm?

3) Process: factors including what risk-mitigation techniques are used, investment team resources, and general evidence of a repeatable investment process. We note here that we’ll focus on this pillar in particular for passively managed funds, where the other two pillars are less influential on the rating.

These three pillars form the basis of the Morningstar Analyst Rating (designated as gold, silver, bronze, neutral or negative) and our forward-looking qualitative opinion on whether a fund will outperform. Historically, this has proven to be the case, with medal-rated (gold/silver/bronze) funds outperforming neutral/negative funds as a group, in multiple time periods after receiving the rating. Today, we use this rating to look for funds in the global equity category that might be a good choice for investors looking to increase exposure outside of Canada.

What we found

Global equity funds with strong track records

Fund Legal NameTickerMER (%)Morningstar Rating for FundsMorningstar Analyst RatingTotal Ret YTD (%)Total Ret 1 Yr (%)Total Ret Annlzd 3 Yr (%)Total Ret Annlzd 5 Yr (%)Total Ret Annlzd 10 Yr (%)Total Ret Annlzd 15 Yr (%)Inception Date
Mawer Global Equity Fund1.315 StarsGold1.79-6.415.958.3112.6210/22/2009
iShares MSCI World Index ETFXWD0.474 StarsSilver2.00-8.426.587.5311.936/18/2009
AGF Global Select Fund1.22n/aBronze0.50-6.4814.1013.2016.729.404/27/2000
Vanguard FTSE Global All Cap ex Canada Index ETFVXC0.214 StarsGold2.57-9.335.596.376/30/2014
BMO Concentrated Global Equity Fund1.234 StarsSilver2.38-6.486.135/14/2018
iShares Core MSCI All Country World ex Canada Index ETFXAW0.224 StarsGold2.51-8.395.856.622/10/2015
iShares MSCI Min Vol Global Index ETFXMW0.484 StarsSilver0.74-1.572.535.7210.547/24/2012

Source: Morningstar Direct | Data as of January 10, 2023

The ETFs and mutual funds that met the above requirements are listed in the accompanying table, alongside their fees, trailing performance, ratings and inception dates. Also included – but not used as a basis for the screen – is the Morningstar Rating for Funds (aka the “star” rating), which is an objective look-back at risk-adjusted returns (after fees). It is no surprise that many of these funds already have a good track record of outperforming against peers. It is also worthwhile to note the appearance of two lower-cost passive options (XWD and VXC), and a “smart-beta” ETF (XMW), showing that there’s room for active, passive and smart-beta approaches to work well.

This article does not constitute financial advice. Investors are encouraged to conduct their own independent research before purchasing any of the investments listed here.

Ian Tam, CFA, is director of investment research for Morningstar Canada.

Be smart with your money. Get the latest investing insights delivered right to your inbox three times a week, with the Globe Investor newsletter. Sign up today.