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Investment News Investment Focus Barclays Wealth Global Markets Funds 18471550

Investment Focus: Barclays Wealth Global Markets funds
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Investment Focus: Barclays Wealth Global Markets funds

07 March 2011 / by Paul Dicken

The Global Markets funds from Barclays Wealth help investors diversify their portfolio without paying higher levels of charges. Using Exchange Traded Funds (ETFs), the funds gain exposure to different assets and markets in a cost-effective way.

There are five funds in the Global Markets range designed around five model portfolios rated by risk, e.g. Global Markets 1 is relatively low risk, investing almost half of its portfolio in cash and short term government bonds.

Asset allocation

Diversification is a key investment principal, aiming to reduce over exposure to one market or asset, such as the stock market in one country, and better position an investor’s portfolio to withstand economic and market shocks.

The Global Markets funds implement the strategic asset allocation principles created by Barclays Wealth which seek to reflect the company’s ‘fundamental thinking about how financial markets work in general and about long and short term trends in asset values’.

The model portfolios Barclays have created are not designed for a particular investor at a particular time but provide a ‘baseline mix of assets’ that aim to provide a level of return at a stated level of risk.   

What are the assets?

Some of the key elements of this asset allocation is that a relatively high level of cash and short-term bonds are held, partly a lesson from the 2008-09 financial crisis, the company says, where these assets provided possibly the only store of value.

Primarily due to theories around correlation – the mirroring of upward or downward movement in asset prices e.g. US and UK shares – commodities form part of the model portfolios because they are seen as less correlated to other assets. Exposure to commodities, such as oil, corn or gold, is also seen as a useful investment during times of high inflation, while also benefiting from economic growth in emerging markets.

As well as developed and emerging market equities (stocks and shares), the portfolios hold a variety of different bonds (government or company debt). This includes investment grade bonds where the issuer has higher credit ratings, and high yield or emerging market bonds where issuers have lower credit ratings or the market is less well-established.

Other assets are real estate and alternative trading strategies. Alternative trading strategies are defined as funds aiming to take active long or short positions in a range of markets, i.e. exploiting either rises or falls in markets.

Some hedge funds fall into this asset category, chosen to provide the potential for returns uncorrelated to other markets.

How the Global Markets range works

Taking the model portfolios, the Global Markets funds invest in a range of other funds, primarily Exchange Traded Funds (ETFs), to gain exposure to different assets, weighted along risk profiles.

ETFs provide a cost effective way of accessing different markets because they aim to track the performance of an index by holding similar assets to that index. For example, the holdings of the iShares FTSE100 ETF closely mirror the FTSE100 index, with the fund holding shares in HSBC, BP, Vodafone, Rio Tinto and GlaxoSmithKline.

This means there are not the costs of active fund management – where a fund manager selects specific stocks to invest in – but just the cost of administering the fund and the trading costs when buying in or selling out of the ETF.

In the Global Markets Funds, the total expense ratios (a measure of the costs for investing in the fund) range from 1.35 per cent to 1.65 per cent. These costs are relatively low in the context of the diverse spread of markets where investments are made.

As the Barclays Wealth model portfolios set out the principles for a diversified investment portfolio, the Global Markets funds also invest across a range of markets, with the balance of the assets held altered in line with the Barclays Wealth economic outlook or market analysis.

See the table below for more information about the five Global Markets funds.

No news, feature article or comment should be seen as a personal recommendation to invest.

The value of investments and income from them can fall as well as rise and you may not get back the full amount invested. Different types of investment carry different levels of risk and may not be suitable for all investors.

ETFs can be higher risk investments than other funds and may not be suitable for all investors. ETFs can be vulnerable to market price fluctuations and other risks including counterparty and currency risk.

Prior to making any decision to invest, you should ensure that you are familiar with the risks associated with a particular investment.

If you are in any doubt as to the suitability of a particular investment, both in respect of its objectives and its risk profile, you should seek independent financial advice.

© Fair Investment Company Ltd