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Fund Manager of the Year: Global Equity

FUND MANAGER AWARDS: Has your global-equity fund manager been nominated for a Morningstar award this year?

Christopher J. Traulsen, CFA 14 February, 2013 | 8:00AM

The finalists among the nominees are now in for the fourth annual Morningstar European Fund Manager of the Year awards. Our analysts across Europe have pulled together to identify those managers who they believe are among the very best at what they do. Nominated managers should have had a strong 2012, but most importantly, they should have shown an ability to serve investors well over the long-term. Only managers who run funds that are Morningstar Medallists—meaning they earned a Gold, Silver or Bronze rating from our analysts—are eligible for nomination. To be a Morningstar Medallist, funds are put through a rigorous evaluation using our five-pillars methodology. In addition to performance, we weigh the quality of management, the strength of the process used to run the fund, the quality of the parent organisation—including how it treats investors in its funds—and costs.

The nominees for the Global Equity Fund Manager Award are:
Kristian Falnes & Team
Rajiv Jain
Charles Macquaker, Roy Leckie & Team

For the past three years, we have given only two of these prestigious awards across Europe: ‘Fund Manager of the Year: European Equity’ and ‘Fund Manager of the Year: Global Equity’. This year, we are also introducing the ‘Fund Manager of the Year: Euro Fixed-Income award’.

The managers nominated by Morningstar’s European analyst staff for each award are as follows. The winners will be announced at the Morningstar Investment Conference, Europe in Vienna on 14 March 2013.

Fund Manager of the Year: Global Equity 

Manager name: Kristian Falnes & Team
Nominated for their work on: 
SKAGEN Global (Morningstar Anlayst Rating: Silver)

Lead manager Kristian Falnes came to the helm of this fund in 2010, but he was hardly a newcomer. Indeed, he had successfully guided SKAGEN Vekst, a heavily Norwegian-biased Global strategy from 1997-2010. Moreover, he deploys the same value-based process here that has helped build Stavanger-based SKAGEN’s deserved reputation as savvy investors over the years. He also has the support of co-managers Torkell Eide and Sören Christensen. As with all SKAGEN funds, Falnes seeks out companies that he believes are undervalued, typically because they are unpopular or under-analysed. Being cheap isn’t enough, however:  there must be an underlying trigger that will lead the market to recognise the value Falnes and his team see. These triggers can evolve over time and the investment case can also evolve, for example they’ve held Samsung Electronics for nearly 10 years now and during that time the company has evolved from being a low cost producer to a market leader in several segments. 

Falnes and his team have shown a willingness to search far and wide for value and emerging markets have proven a fertile hunting ground. Indeed, the fund’s emerging markets stake is typically notably higher than peers. That having been said, it’s far from a beta bet on the developing world. Indeed, a great deal of the ‘value-add’ here over the long-term has been driven by stock selection in developed markets. The team’s willingness to be patient with unpopular names and to wade into emerging markets means it carries above average risks, but for investors who share the team’s patient approach, the rewards are clear: Under Falnes thus far, the fund has outperformed its average peer by three percentage points per annum, including a top-quintile return in 2012. The fund’s 10 year return, although mostly built by others, was driven by the same process and beats the category average by more than 10 percentage points per annum. 

Manager name: Rajiv Jain
Nominated for work on: 
Vontobel Emerging Markets Equity (Morningstar Analyst Rating: Silver)
Vontobel Global Value Equity (Morningstar Analyst Rating: Bronze)

Rajiv Jain has provided his investors with a beacon of stability at both of these funds. He has managed Vontobel Global Value Equity since its inception in 2005 (he was joined there by co-manager Matthew Benkendorf in 2008) and has run Vontobel Emerging Market Equity since 1997. Throughout his career, he has deployed a rigorous, repeatable process driven by bottom-up research and shown a distinct willingness to stand apart from the crowd. He looks for steady and profitable growers, with very clear accounting, understandable business plans and sound corporate governance. As a result, this portfolio of 45-60 stocks has a consistent bias towards quality that helps limit the funds’ exposure to the economic cycle and ‘risk-on, risk-off’ market dynamics relative to their respective peers.

This well-executed, quality-oriented approach has helped limit both funds’ downside risk compared to their peers. In 2008, for example, Global Value Equity lost roughly seven percentage points less than its average peer, and Emerging Markets Equity lost 10 percentage points less than its average peer. The strategy can often lag when lower-quality stocks rally, as was the case at both of these funds in 2009. Nevertheless, over the long-term, investors have been amply rewarded: Global Value Equity has outperformed its average peer by 4.45 percentage points over Jain’s tenure, while Emerging Markets Equity has outperformed its category average by 3.82 percentage points per annum. We remain impressed by Jain’s capabilities and his ability to deliver excess returns while limiting losses, making this fund easier for investors to stick with through a market cycle.

Manager names: Charles Macquaker, Roy Leckie & Team
Nominated for work on: 
BNY Mellon Long-Term Global Equity (Morningstar Analyst Rating: Silver) 

Charles Macquaker and Roy Leckie formally head the investment team at Edinburgh-based Walter Scott but this is a truly team-based effort and analysts’ individual stock recommendations require approval from the whole team before they make it into the portfolio. The team of 21 is structured around the global equity fund with analysts divided into three geographic groups: the Americas, Europe and Australasia. The team seeks out companies with sturdy growth characteristics rather than fast-growing, less-mature or lower-quality businesses. To this end, they emphasise features such as low debt/equity ratios and repeatable business models in addition to growth. The resulting portfolio is typically laden with established names such as Microsoft (MSFT) and Colgate- Palmolive (CL), giving it a distinctive cast within its Global Large-Cap Growth Equity category. 

For a growth-tilted strategy, this fund has been an admirable protector of investors’ capital during downturns, falling just 8% in 2008 in stark contrast to the 25% loss experienced by the average fund in its peer group. The flip side is less participation during upward trending markets but over the longer term the fund has comfortably outperformed peers and its benchmark MSCI World index. Much as with Jain’s offering, we think this fund’s low volatility of returns makes it straightforward to use as a core global equity fund. 

Click here to discover who's been nominated Fund Manager of the Year: European Equity. 

Click here to discover who's been nominated Fund Manager of the Year: Euro Fixed-Income.

The awards will be announced on 14 March 2013.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article
Security NamePriceChange (%)Morningstar
Rating
BNY Mellon Long-Term Global Equity B EUR1.46 EUR0.43-
SKAGEN Global A1,128.26 NOK0.63
Vontobel Fund - Global Equity A189.61 USD0.66
Vontobel Fund Emerging Markets Equity A591.02 USD-0.33
About Author Christopher J. Traulsen, CFA

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.