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International stocks are enjoying a resurgence in the first quarter, but it might be premature to write-off domestic equities. Advisors and investors looking to split the difference can consider global funds, including those of the exchange traded funds varietal fund.
Global equity funds feature a mix of domestic and foreign stocks, but owing to a reliance on weighting by market capitalization, many of the passive funds in the category don’t offer much in the way of geographic diversity because they’re heavily allocated to U.S. stocks. That implies investors may miss out on potential upside if foreign stocks continue rallying.
The actively managed FPA Global Equity ETF (FPAG) could be the mousetrap for improving upon that scenario. For some advisors, that branding might ring a bell because FPAG is the ETF offshoot of the FPA Crescent FPACX – a mutual fund with a solid long-term track record.
Count FPAG among the quietly successful ETF “conversion” stories. The fund is just over four years old and has more than $186 million in asset sunder management, confirming there’s appetite for the FPACX style and management team via the ETF wrapper.
FPAG Methodology Matters
FPAG attempts to beat the MSCI All-Country World Index (ACWI) and it uses a concentrated lineup of 30 to 50 stocks to accomplish that objective. While that’s a departure from passive global ETFs, it’s a methodology that works for FPAG.
“A common link is the team’s focus on compounders—businesses that are generally leaders in their industries, possess a competitive edge, and have solid balance sheets and shareholder-centric management. The resulting 30-50 stock portfolio is value-oriented and quality-focused,” notes Morningstar analyst Chris Tate.
FPAG is usually fully invested, meaning it typically doesn’t hold cash reserves on par with other actively managed funds. Sure, that implies FPAG may encounter added turbulence if broader market volatility swells, but those low cash reserves also signal managers’ commitment to the ideas represented in the fund. An emphasis on quality helps, too.
“The managers' quality-focus means solid returns aren’t limited to value-led markets despite their value leanings—they won’t invest heavily in deep-value names and tend to avoid speculative growth,” adds Tate.
FPAG Delivering the Goods
In fund terms, a product that isn’t yet four years old, as is the case with FPAG, is still “young.” Youth aside, the ETF’s track record to date has been impressive.
“FPA Global Equity ETF is off to a promising start,” observes Tate. “From the ETF’s launch through January 2025, it outpaced its prospectus benchmark by 2.4 percentage points annually, and the category benchmark, the MSCI ACWI Value Index, by more. Further, the longer-running separate account has also delivered good results, gross of fees.”
FPAG could be further supported by the groundswell of momentum for active ETFs, particularly those with ties to established, successful mutual funds.
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