Jonathan Miller: Welcome to the Morningstar Manager Check-up, our whistle stop tour of three fund updates.
We start with the T Rowe Price US Blue Chip Equity fund. The fund originated in the US launched in 1993 and this version is available to UCITs investors. Larry Puglia has been the sole manager throughout this period. Puglia looks for companies with above-average, durable growth prospects, strong free cash flow, and management that allocates capital well.
He’ll then make bigger bets on dominant franchises which he’s executed to good effect with Amazon, Facebook and Alphabet. The leaning towards fast growers can make the fund susceptible to underperformance in market corrections but overall, we believe there’s a lot to like. Experienced management, reasonable fees, a strong parent company, and a consistent investment approach continue to support its Morningstar Analyst Rating of Silver.
Next, it’s on to fixed income with the Artemis Strategic Bond fund. James Foster and Alex Ralph have comanaged this fund since its launch in June 2005. The strategy combines top-down views with bottom-up elements. Foster focuses on investment-grade, especially financials, and Ralph on high-yield, particularly industrials. We see their skills as complementary and the fund’s credit bias has been the largest driver of its returns over time.
Within high-yield, the emphasis is on credit selection, while on the investment-grade front, analysing sector fundamentals plays a greater role. This high conviction approach requires patience to play out. But given the managers’ solid track record in executing this flexible strategy as well as the advantage of low fees, we maintain its Morningstar Analyst Rating of Silver.
Finally, it’s on to an ethical offering, the Standard Life Investments UK Ethical fund. This is managed by experienced investor Lesley Duncan, who’s been at the helm since June 2004. The process uses a proprietary quantitative model across a host criteria and also employs fundamental analysis. Given the ethical nature all stocks are screened and once a stock passes the negative screen it’s deemed acceptable for investment.
It’s important to be aware that the ethical mandate and the mid- and small-cap bias can lead the fund's performance to diverge significantly from the index. 2016 was a case in point, with the fund significantly underperforming as large-cap stocks benefited from sterling weakness. Plus, the resources sectors, performed strongly, but the fund is largely prohibited from investing here. We have a positive view on the tried-and-tested equity process and the fund retains a Morningstar Analyst Rating of Bronze.
