On Tuesday, we announced the coming launch of our inaugural Morningstar Pan-Europe Manager of the Year awards. You can read more about the principles behind the awards and the selection process here. They are based on the forward looking insights of our team of more than 25 qualitative fund analysts in Europe a
nd Asia, and seek to recognise those funds that fared well in 2009, but that also have proven themselves to be excellent stewards of shareholders’ capital through time.
There are two awards: Morningstar Pan-Europe European Equity Manager of the Year and Morningstar Pan-Europe Global Equity Manager of the Year. The nominees for the Morningstar Pan-Europe European Equity Manager of the Year are as follows (you can see the Morningstar Pan-Europe Global Equity Manager of the Year nominees here).
Nigel Bolton
BlackRock Global Funds – European
Our analysts believe Nigel Bolton has made a big difference at this fund since arriving at BlackRock in early 2008. He stabilised and improved the team, and deployed a clear, consistent process that focuses on identifying cash generative companies with experienced management and whose expected earnings are (arguably) underestimated by the market. However, he also incorporates a sensible nod to the macro environment that gives the fund a solid chance to outperform through the cycle. While Bolton hasn’t been at this fund that long—normally a red flag for us--he used the same process to very good effect while at Scottish Widows before coming to BlackRock, and we have a high degree of confidence in his abilities.
Bolton’s prowess has been on full display since his arrival here. While the fund lost 21% (GBP)/40.10%(EUR) in 2008, most other funds in the Morningstar Europe Large-Cap Blend Equity category fell far more amid the downturn. Indeed, the fund ranked in the top-quintile of its peer group that year. Shortly after taking the helm, Bolton helped his cause by moving up the market-cap ladder and favouring higher-quality defensives such as healthcare and telecoms over more cycical fare, a tribute to his macro research. In 2009, his analysis led him to reverse this stance and to cut back on defensives and add to beaten-down financials, helping drive the fund to a top-decile return of 27.4%(GBP)/38.6%(EUR). Not every manager can time such rotations well, but Bolton has shown an uncanny ability to do so.
Francisco García-Paramés
Bestinver Internacional
This fund has flexibility to move across the market-cap spectrum and different regions, but it has historically been clearly focused on European small and mid caps. Manager Francisco García-Paramés has done an outstanding job for investors here over more than a decade, employing a disciplined, high-conviction process that focuses on long-term results rather than chasing the latest fad. He has consistently applied his value bottom-up oriented approach, even through tough periods for his strategy such as the late 1990s. We also think well of Bestinver; the house demonstrates a clear focus on generating good long-term results for investors and sticks to its core competencies rather than marketing to drive growth in hot asset classes.
The fund posted a particularly impressive return of 71.9%(EUR)/57.9%GBP in 2009. While it clearly benefitted from the strength of small caps in the period, the managers added significant value beyond that “tailwind,” with the fund beating the average offering in its Morningstar Europe Small Cap Equity category by 23.7 percentage points in EUR terms (+21.7 in GBP). As we would expect from such a concentrated, stock-picker’s fund, the main drivers of returns were stock-specific, with companies such as Debenhams, Virgin Media and Smurfit Kappa boosting results—even as García-Paramés scaled them back to make way for more undervalued fare. That performance is no fluke—in keeping with it’s long-term focus, the fund has also delivered for investors through time, with top decile returns over the past 3, 5 and 10 years. Moreover, while the fund did post a large absolute loss in 2008, it still lost less than 83% of its peers that year.
Rod Marsden and Paul Wild
JOHCM European Fund & JOHCM Continental Europe
Our analysts see several attractions in managers Rod Marsden and Paul Wild. The duo has jointly run JOHCM European and JOHCM Continental European for eight years, putting their extensive experience in the industry to excellent use. In an industry characterized by high manager turnover, we’re encouraged by the stability featured in this team. Few managers can consistently succeed in their top-down calls and even fewer can run such a strategy in a successful manner through time, but Marsden and Wild have done exactly that. Their work at a firm which has investors’ interests at heart -- by keeping costs low and setting capacity limits for funds -- is the icing on the cake.
The managers have skillfully navigated the latest downturn. Although the funds posted large absolute losses, they lost considerably less than most of their Morningstar category peers. The duo’s move to cut financials exposure early on in 2007 proved timely and positioning their portfolios defensively helped their cause further. Then early in 2009 the managers made a shift back towards economically-sensitive fare and reaped the benefits when the market rally began in March. The managers’ focus on quality meant they had to be selective in what stocks they added but the funds still ended the year ahead of their peers. While their outperformance in 2009 was not as impressive as that of some of the other funds here, their ability to limit downside in 2008 and still deliver above-median results in a year as wildly different as 2009 earns our respect. Through time the managers have built remarkable records for these funds, outperforming their Morningstar category rivals in every calendar year since inception. We have strong conviction in their abilities and we think investors are in extremely capable hands here.
Frank Hansen
Allianz RCM Small Cap Europa
Frank Hansen has shown himself to be among the better managers around when it comes to European small and mid caps (although billed as a small-cap fund, Hansen’s universe permits him to go firmly into mid-cap territory, up to 4 bil EUR in market cap—a flexibility he has often used). He has been at the helm at this fund for over a decade and during that time has consistently executed a pure bottom-up process focused on high-quality growth stocks while leading a stable team of dedicated small cap analysts in Frankfurt and London. While his style necessarily entails courting more price-risk than value-oriented managers, Hansen helps manage risk by spreading assets across roughly 100 names. That said, the process is not bound to a benchmark and Hansen has added notable value for investors over the years via active positions, including an overweight in materials in 2009.
That materials overweight and some notably strong picks such as chip-firm Dialog Semiconductor, mine operator Vedanta Resources, and energy concern Acergy helped boost the fund to a 48.3% (EUR)/36.3%(GBP) return in 2009, besting its average Europe Mid-Cap Equity peer by 10 percentage points, a top-quintile showing in the category. The strategy clearly entails risk, as was on display in 2008, when the fund’s loss exceeded the category norm, but for investors seeking exposure to faster-growing European small and mid-caps, it has more than proven its worth.
