L&G Global 100 Index: world’s top 100 companies tracked

One of the best-selling funds on the Fidelity Personal Investing platform in June was the L&G Global 100 Index Trust, which has benefited from the outperformance of technology companies. It is easy to think of this type of passively managed tracker as a low risk option, but when the benchmark is heavily concentrated in a handful of stocks it can be vulnerable to a change in market sentiment.

The fund invests in the shares of 100 companies of major importance across all geographical areas, as represented by the index. This means that investors get access to a low-cost global portfolio that is dominated by a few very large businesses.

An unusual benchmark 

Its benchmark is the S&P Global 100 index, whose constituents are drawn from a much broader universe of 1,200 international stocks. The selection is mainly dictated by the market value of the different companies, although they also have to be sufficiently liquid to be included, with the sector weights adjusted to reflect the wider market.

At the end of June the resulting index had a trailing price earnings (P/E) of 27.44 and a price-to-book ratio of 4.99.¹ These metrics look expensive, yet it is an approach that has done well with an annualised return of 12.27% over the last decade. Please remember past performance is not a reliable indicator of future returns.²

Concentration risk

To really understand what you are investing in you need to look at the underlying holdings. At the end of May the fund had a total of 107 stocks, of which the ten largest accounted for 55.2% of the assets. Of these, the five biggest – Microsoft, Apple, Nvidia, Amazon and Alphabet (A and C shares) – made up 46.3%, a fact that suggests they will dominate the returns.³

L&G Global 100 Index Trust - top 10 holdings

1. Microsoft
2. Nvidia
3. Apple
4. Amazon
5. Alphabet Class A
6. Alphabet Class C
7. Eli Lilly
8. Broadcom
9. JP Morgan Chase and Co
10. Exxon Mobil

Source: Fidelity International, 30.6.24

By far and away the largest sector weighting was Information Technology at 41.1%, with the next biggest being Healthcare at 10.8%. The portfolio is dominated by US stocks, which represent 78.2% of the assets, with the UK a distant second at 5%.⁴

Strong performance

It is easy to see why the fund is so popular, as over the five years to the end of May it has returned 111.35%. This is 10.72% less than the benchmark due to the impact of fees and other expenses, as well as any tracking error factors. Please remember past performance is not a reliable indicator of future returns.

What if the market dominance changes?

One of the criticisms levelled at cap-weighted tracker funds is that they provide exposure to ‘yesterday’s winners’ and are vulnerable to a change in market sentiment. There was some recent evidence of this when one of the largest holdings, chipmaker Nvidia, experienced some short lived selling pressure.

If tech stocks go through a difficult period then the fund would be expected to suffer, which is why it is always important to make sure that you hold it as part of a properly balanced portfolio. The company that runs it, L&G, has rated it towards the higher risk/return end of the spectrum, so it is worth keeping this in mind.

How do the costs stack up?

Given the fact that it is a passively managed tracker fund it is quite surprising that the ongoing charges are as high as 0.52%, although this is still cheap compared to most actively managed alternatives.

More on L&G Global 100 Index Trust

Past performance is not a reliable indicator of future returns.
Source: Morningstar from 30.6.19 to 30.6.24. Basis: bid to bid with income reinvested in GBP. Excludes initial charge.

Source:

^1,2 S&P Dow Jones Indices, 28 June 2024
^3,4 L&G Global 100 Index Trust factsheet, 31 May 2024

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Overseas investments will be affected by movements in currency exchange rates. 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 fund may use 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. 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.