BNY Mellon Long-Term Global Equity Fund

Some fund management companies specialise in a single investment philosophy, which enables them to refine their strategy and apply it consistently in all market conditions. One such is Walter Scott, a business based in Edinburgh, whose mandates include BNY Mellon Long-Term Global Equity Fund.

They are a stock picking firm with a 'quality' bias that look for companies with reliable cash flows, strong brands and pricing power. It is this concentrated and committed approach that has helped to earn the fund a place in Fidelity’s Select 50.

Objective and approach

BNY Mellon Long-Term Global Equity aims to achieve capital growth over the long-term (5 years or more), by seeking to identify world-class companies with the potential to generate meaningful real rates of return. It adopts a traditional ‘buy and hold’ strategy and has an unrelenting focus on stock selection with little reference to the benchmark.

The fund targets companies that are capable of maintaining an annual rate of wealth generation of 20% a year. These sorts of stocks tend to be more expensive than others, hence the patient approach that enables the power of compounding to take effect.¹

Why the unusual set-up?

It is quite unusual for a large investment firm like BNY Mellon to outsource the management of one of its funds, but writing on their website, they say that Walter Scott’s distinctive process is ideally suited to running global equity portfolios.

“The firm’s team of investment professionals has a long track record of identifying and holding shares in world-class companies, with the aim of allowing them to realise their growth potential and compound returns over the long term.”²

The underlying portfolio

It is a concentrated portfolio with around 50 holdings and at the end of September the ten largest positions accounted for 30.4% of the assets. These included well-known names such as: Taiwan Semiconductor, Microsoft, Alphabet and Mastercard.

Top 10 holdings

1. Taiwan Semiconductor
2. Microsoft
3. Novo Nordisk
4. Amphenol
5. Linde
6. Alphabet
7. Mastercard
8. Inditex
9. AIA Group
10. Intuitive Surgical

Source: BNY Mellon Long-Term Global Equity Fund factsheet, 30 September 2024

The largest geographic allocation was the US at 63.2%, followed by Europe ex UK at 16.1%. However, the main sector weightings were more evenly divided, with Information Technology 23.5%, Healthcare 21.1%, Industrials 15.7% and Consumer Discretionary 15%.³

Performance

Over the five years to the end of September the institutional W accumulation share class generated a cumulative return of 52.91% compared to the 69.59% produced by the MSCI World NR benchmark. Please note past performance is not a reliable indicator of future returns. The main reason for the underperformance is likely to be the relative lack of exposure to AI-related stocks, although the fund still did better than the global sector average over the period.⁴

It is interesting to note that the active share was a very high 86.5%. This measures the extent that the portfolio holdings differ from the benchmark and demonstrates that it is a genuine stock picking fund that bears little resemblance to the index.⁵

How do the costs stack up?

BNY Mellon Long Term Global Equity has an annual management fee of 0.75%, which is reflected in the ongoing charges of 0.81%. Such a figure seems reasonable for an actively managed global mandate.⁶

Who is it suitable for?

The fund is classified as medium to high risk with a rating of 5 out of 7, so investors need to take a long-term view of ten years or more. Its quality bias means that it could complement a value strategy such as Dodge & Cox Global Stock or Schroder Global Recovery, which are both members of the Select 50.

More on BNY Mellon Long-Term Global Equity Fund

Past performance is not a reliable indicator of future returns

Source: Morningstar from 30.9.19 to 30.9.24. Basis: bid to bid with income reinvested in GBP. Excludes initial charge.

https://www.fidelity.co.uk/factsheet-data/factsheet/IE00B54J6879-dodge--cox-worldwide-global-stock-acc/fidelity-insight

Source:

^1,2 BNY Mellon, October 2024
^3,4,5,6 BNY Mellon Long-Term Global Equity Fund factsheet, 30 September 2024 

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Select 50 is not a personal recommendation to buy or sell a fund. Overseas investments will be affected by movements in currency exchange rates. Investments in emerging markets can be more volatile than other more developed markets. This fund invests in a relatively small number of companies and so may carry more risk than funds that are more diversified. This fund uses financial derivative instruments for investment purposes, which may expose the fund to a higher degree of risk and can cause investments to experience larger than average price fluctuations. Reference to specific securities should not be construed as a recommendation to buy or sell these securities and is included for the purposes of illustration only. This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.