Why did you launch the Kernel S&P Global 100 Fund? Great question. This is a fund of truly global mega multinationals. These are the biggest companies and brands in the world, all together in one fund, from Apple to Samsung, Nestle to Colgate, Unilever to GlaxoSmithKline, Toyota to Ford.
You will recognise almost every name on the list and for those that you don’t, a quick google of their brands or products and you probably will. Through the Global 100 you can own a piece of each of them and their future prosperity, with just one click.
Collectively, these companies are worth USD14 trillion. To qualify for inclusion in the Global 100, they must have operations in all three major continents and have their assets and revenue streams spread around the world.
Over the previous 3, 5 and 10 year periods, as measured in the first half of 2020, the Global 100 mostly outperformed for both higher returns and lower volatility against larger broader indices.
|3 Year||5 Year||10 Year|
|S&P Global 100||10.75%||10.15%||10.97%|
|S&P Global 1200||7.18%||7.57%||10.45%|
|S&P Global BMI||5.98%||6.59%||9.61%|
The importance of these companies in the global economy, and their size in proportion to developed markets, means the portfolio is sufficiently diversified across sectors and countries to capture the performance of the global market. 100 companies in a well-constructed index is enough to give you the “market return” or your “core”.
So why just 100
How much diversification do you need?
The smallest constituent of the Global 100 at 0.08% is Nissan Motors, worth USD15 Billion. By comparison to the S&P Global 1200, where Wells Fargo at 101st place represents just 0.21% of that index.
There is a debate over how many stocks are needed to reduce risk while maintaining a high return, but that debate usually focuses on a minimum. Depending on who’s research you’re reading, this minimum can vary between 20 and 40.
The reason is that the more companies you add, the more the trading cost and administrative record keeping required.
And then where do you draw the line?
There are 1212 stocks in the Global 1200, 3040 in the MSCI World Index, and 11,801 in the S&P Broad Market Index of 50 countries. Even then you still couldn’t be 100% sure to capture every future super stock. However, by the time the company is large enough and global enough it should enter the S&P Global 100.
Therefore, by offering a well-diversified S&P Global 100 index, we are able to provide in New Zealand dollars with correct tax handling and claiming of foreign tax credits, an efficient product without the drag and cost of too many positions. That’s the essence of a portfolio core.
Then, if some company grabs your eye, you can add that to your portfolio as a satellite, having full and transparent insight as to whether your fund is holding it already.
The must-knows about the Kernel S&P Global 100:
- It has good sector mix: The Global 100 mirrors the sector weights of the broader universe of stocks from the S&P Global 1200, in order to approximate the sector mix of the full global economy. Giving you confidence that it is representative of the total market
- The companies are big & very global: The index includes transnational companies with a minimum float–adjusted market cap of USD 5 billion
- The index considers liquidity: The higher the 12-month value traded or float turnover of stock, the more likely it is to be included (given two comparably sized companies)
- Rebalancing frequency: Quarterly
- Current number of holdings: 101 as at 6 July 2020
- Top 10 holdings sector exposure: I.T., Consumer Discretionary, Communication Services, Health Care, Consumer Staples, Financials.
- 10 countries: Roughly 70% allocation to the US, 17% to Europe, 7% the United Kingdom and 6% to Asia/Australia, as at June 2020.
- Has outperformed the Global 1200 over 1, 3 and 5 year time periods to June 2020.
Find out more about the Kernel S&P Global 100 fund.