Rather than committing to one market or the other, the highly selective investment approach used to manage the First Eagle Global Fund may serve as a bridge between the familiarity of domestic equities and the opportunities available abroad.
A decade of lopsided outperformance by domestic equity markets has led some investors to question the value of international diversification. We think this is a mistake. In our view, not only are many great businesses domiciled in markets outside the US, exposure to a broad global equity opportunity set has the potential to provide attractive portfolio diversification benefits.
While it's true that post-crisis market dynamics have made meaningful diversification more difficult, we believe they also have highlighted the potential benefits of an active, benchmark-agnostic approach to the global equity opportunity set. Though recent trends have favored domestic equities over international markets, it would be imprudent to ignore decades of market history demonstrating that relative performance has fluctuated over time. Rather than committing to one market or the other, the highly selective investment approach used to manage the First Eagle Global Fund may serve as a bridge between the familiarity of domestic equities and the opportunities available abroad.
The Dominance of Mega-Caps in the S&P 500 Index
• While the US has seen strong performance over the past decade, the number of stocks driving those index-level returns has grown increasingly concentrated. At the beginning of the bull market in 2009, for example, 56% of stocks in the S&P 500 were beating the overall index return; today only 35% can make that claim.
• As a result of this reduced market breadth, the top 10 stocks in the S&P 500 comprised 28% of the index as of September 30, 2020, a higher percentage than at any point in at least 40 years and up from 23% as of year-end 2019. This top-heavy composition may leave the index and its investors susceptible to idiosyncratic shock.
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