Evidence of such artisanal preference can be found across the consumer landscape, from leather goods to bicycle parts to clothing. Many of the brands that exemplify this paradigm virtually define the niches in which they operate and, perhaps most importantly, have been able to avoid the commodification of their aesthetic even as they’ve grown in prominence over time.

The First Eagle Global Fund, in our view, offers a similarly idiosyncratic and time-tested style of equity investment. The longest-standing fund in Morningstar’s Global Allocation category with assets in excess of $1 billion, the go-anywhere, benchmark-agnostic Global Fund targets real absolute returns across business cycles while seeking to avoid the permanent impairment of capital by investing in assets that demonstrate scarce quality and value.¹ We believe the fund’s investment philosophy and track record represent a diversifying complement and source of long-term ballast in broadly diversified portfolios.

The Illusion of Choice

The job of the financial advisor has grown more complex in recent years, as changes in the industry have led many to adopt a more holistic approach to client relationships that emphasizes a range of comprehensive, high-touch services beyond portfolio construction. Given increasing demands on their time, a number of advisors have relinquished some or all of their asset allocation responsibilities to risk-based models and populated them primarily with passive investment vehicles that offer lower-cost exposure to market beta.

But while financial advisors have more investment tools at their disposal than ever before, does the abundance of largely homogenized options merely represent the illusion of choice?

The Global Fund seeks to offer financial advisors and their clients a truly differentiated source of risk and return. Selectivity is at the heart of our value-oriented investment process, and the flexibility of our mandate allows us to apply this selectivity to the global opportunity set from the bottom up. We look for assets we believe demonstrate scarce quality and value, and invest in them only when we can do so at a “margin of safety.”² Cash holdings are a residual of this investment discipline and serve as a form of deferred purchasing power. Our stock selection is complemented by a structural allocation to gold—a store of value for millennia—as a potential hedge against extreme market outcomes.

Going Against the Grain

What constitutes true diversification can be hard to pin down in increasingly top-heavy markets. For example, while the S&P 500 Index is considered a proxy for the US equity market, the market capitalization of the 10 largest (primarily tech-related) stocks in the index comprise 36% of its total. Similarly, the MSCI World Index’s weighting in US stocks exceeds 70%.³ Portfolios benchmarked to these indexes—either active or passive—likely have similar concentrations. How can advisors efficiently build and maintain diversified client portfolios given these dynamics? 

Many of us on the Global Value team had the pleasure of working side by side with Jean-Marie Eveillard, who launched the Global Fund in 1979 and served as its portfolio manager until he retired in 2008. Of all the wisdom he shared, this is perhaps the most resonant: “I would rather lose half my shareholders than lose half of my shareholders’ money.” 

Upside capture and downside mitigation have always been central to the Global Fund’s investment strategy, and this mindset historically has provided resilience in the face of market downturns that occur more often than most appreciate—even during extended bull markets. The S&P 500 has experienced negative returns in 49 rolling five-year periods and 24 rolling 10-year periods since 1979, while the MSCI World has posted a respective 58 and 14. The Global Fund has had zero.⁴ Importantly, our focus on minimizing potential losses during periods of broad market weakness amplified the fund’s potential upside during the subsequent recoveries, resulting in higher cumulative return with lower risk compared to the indexes as well as a range of Morningstar fund categories.⁵ 

The Global Fund’s success in seeking to preserve capital can be at least partially attributed to our active avoidance of areas of the market—be it individual stocks, sectors or regions/countries—that don’t meet our underwriting standards. While this historically has caused the fund to miss out on periodic sharp rallies concentrated in certain parts of the markets, it also has enabled us to sidestep the full brunt of the corrections that inevitably followed. 

In fact, if you look at the fund’s track record over time, key turning points in performance were the result of acts of omission: being out of Japan in the late 1980s, for example, and being largely out of technology in the late 1990s and financials in 2007 and 2008. Moreover, challenging markets historically have provided us with opportunities to buy fundamentally solid businesses at what we view as discount prices; that is, to plant seeds we were able to harvest when market conditions normalized.

Confront Uncertainty with the First Eagle Global Fund

The Global Fund has a 40-plus-year track record of generating absolute returns while seeking to avoid the permanent impairment of capital—a performance profile we believe is foundational to effective long-term asset allocation.⁶ We build the portfolio from the bottom up, assembling a select group of assets that in our view are positioned to endure the inevitable vicissitudes of the business cycle, local and geopolitical turbulence, and the cumulative ravages of inflation and currency debasement.

In short, we seek quality. And we do so through an approach that mirrors the same characteristics we value in an investment—commitment to craft, consistency of discipline and intentional timelessness.