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Fund Manager of the Year: Euro Fixed-Income

FUND MANAGER AWARDS: Has your euro fixed-income 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 are:
Andrew Balls
Paul Causer & Paul Read
Tanguy Le Saout & Cosimo Marasciulo

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: Euro Fixed-Income

Manager name: Andrew Balls
Nominated for work on: 
PIMCO GIS Euro Bond (Morningstar Analyst Rating: Silver) 

Andrew Balls has only held the reins at PIMCO GIS Euro Bond since February 2009, but he has been with PIMCO since 2006, is a member of the Investment Committee that helps set the tone for all PIMCO funds, and heads up the fixed-income giant’s European portfolio management.  The style here is classic PIMCO, taking longer-term bets based on a 3-5 years macro outlook, backed by bottom-up research for issue selection. The portfolio is constructed in line with PIMCO’s index-aware stance but as with all the group’s portfolios, Balls has the flexibility to implement the group’s broader top-down views. For example, the strategically positive outlook on emerging markets over recent years has been held in the fund in judicious size. Similarly, he was able to hold a meaningful overweight in corporate bonds, including bank bonds, post-2008. 

Performance under Balls has been exemplary as the fund has benefited from the medium-term preferences for Emerging Markets Debt (EMD) and corporate bonds. That said, the fund should not be seen a simple pro-credit proposition; for example, in 2012, the team was de-risking until the August ECB announcement on the view that valuations were progressively less attractive when placed in the context of the ongoing potential for volatility in a low-growth world. The fund has outperformed its peers in every calendar year from 2009 forward. Over Balls’ tenure the fund’s retail E class has returned 8.21% per annum, easily eclipsing the 4.93% return of its Citi EuroBig EUR benchmark and the 5.21% return of its average peer in the Morningstar EUR Diversified Bond category. In 2012, the fund rose 13.86%, vs. 10.74% for the benchmark and 9.45% for the category average, owing largely to its financials exposure.  

Manager names: Paul Causer & Paul Read
Nominated for work on: 
Invesco Euro Corporate Bond (Morningstar Analyst Rating: Silver) 

Paul Causer and Paul Read bring exceptional experience and continuity to the management of this fund. The two co-heads of fixed income have managed funds together at Invesco Perpetual since 1995 and have over 25 years of experience each in bond markets. They have managed this Euro Corporate fund since launch in March 2006, and deploy the same flexible, macro-oriented process here that has led them to such success at their other mandates. They will express a high conviction view when they see value; for example, in 2011 they underperformed the category as they had a significant weighting in financials, given the additional yield available on many instruments.

That kind of flexibility can be risky in the wrong hands, but Causer and Read have shown an ability to use it to investors’ advantage in different market environments. Since inception to the end of June 2012, the fund is ahead of the category average by 3.23 percentage points per annum—an exceptionally wide margin. In 2012, they guided the fund to a return of 20.34%, placing in the EUR Corporate Bond category’s top decile after benefiting from a rally in many of the financials issues that had held the fund back in 2011.

Manager names: Tanguy Le Saout & Cosimo Marasciulo
Nominated for work on: 
Pioneer Funds Euro Aggregate Bond (Morningstar Analyst Rating: Silver)
Pioneer Funds Euro Bond (Morningstar Analyst Rating: Bronze) 

Tanguy Le Saout heads up Pioneer’s European fixed-income team and we view him as largely responsible for its development and success. In particular, he put into place a risk-budgeting approach where analysts and strategists have the flexibility to implement bets, but within precise guidelines.  Le Saout has worked alongside comanager Cosimo Marusciulo for more than 12 years. The pair take an essentially top-down approach and begins by initially defining (as relevant for the mandate) the bond sector allocation, particularly between government and corporate bonds, country allocation, and duration positioning.  Although they must adhere to their overall risk budget, the team is willing to take off-benchmark bets. For example, the team can take a degree of currency exposure as well as non-euro interest risk. More recently, starting from the last quarter of 2011 and in 2012 until October, the team was overweight periphery countries. 

Le Saout and Marasciulo have shown a marked ability to make such bets pay over time. From March 2008, the first full month of its inception, through the end of 2012, Pioneer Euro Aggregate Bond returned 6.82% annualised, beating its average EUR Diversified Bond peer by 2.91 percentage points per annum and its benchmark Barclays Euro Aggregate Bond by 1.27 percentage points per annum. In 2012, although in-line with its benchmark, the fund delivered a top-third return versus its category peers. Although Pioneer Euro Bond, like most government funds, is slightly behind its JPM EMU benchmark, from the first full month of Le Saout’s tenure in March 2004 through the end of 2012it has strongly outperformed its EUR Government Bond category peers, returning 4.26 percentage points per annum, compared to 3.52% for the category average.

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

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

The awards winners will be announced on 14 March 2013.

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Securities Mentioned in Article
About Author Christopher J. Traulsen, CFA

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