Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate JOHCM UK Growth, JPM China and Foreign & Colonial Investment Trust

Jonathan Miller 12 July, 2018 | 12:35PM

 

 

Jonathan Miller: Welcome to the Morningstar Manager check-up for fund updates from our analyst team.

Mark Costar has run JOHCM UK Growth since its launch in 2001 with Vishal Bhatia acting as co-manager. His position was confirmed at the turn of the year and the duo have worked together for a decade. The managers focus on finding undervalued, undiscovered, and mispriced growth opportunities. This can result in investments across the value-growth style spectrum, as long as the duo believes a company’s growth potential is underappreciated by the market.

The bottom-up approach relies on rigorous analysis of companies to build a thorough understanding of their prospects, risks, and opportunities. There’s a contrarian tilt, meaning that returns can deviate meaningfully from those of the index and peers, particularly over shorter time periods. This has resulted in a volatile performance profile, but over the long term investors have been compensated for that risk. Patience is therefore required, but we believe this is a strong UK all-cap offering so it retains its Morningstar analyst rating of Silver.

JPM China saw a change of lead manager a couples of years ago but we still believe there’s positive attributes. Howard Wang’s been the key decision maker since 2016, but he’s run a Greater China fund since 2005. The supporting team has been growing and we feel it’s adequately resourced. Analysts play an important part in the research process and rank stocks based on a number of characteristics as well as valuation metrics.

The fund focuses on secular growth companies, which are those with strong earnings or cash flow growth, robust business models with barriers to entry, and a favourable competitive landscape. Previous allocations to deep-value, recovery stocks has come down, and the fund has shown consistent growth characteristics. It’s worth noting that fees are favourable for this space, so along with our confidence in the manager Wang and his proven investment process, we maintain the fund's Morningstar Analyst Rating of Bronze.

The Foreign & Colonial Investment Trust (FRCL) recently celebrated its 150th anniversary and in our opinion is still going strong. Paul Niven plays a key role, chairing the investment policy group at F&C. He has headed the Multi Asset solutions team since 2002, and is head of asset allocation. With a global portfolio, the objective is to grow both capital and income, and in both respects it has delivered. In particular, the fund has paid 47 years of consecutive dividend increases. Niven is responsible for the asset allocation strategy, with stock selection delegated to regional colleagues or external managers. A few years ago we saw a move to reduce dependence on the UK for the income element, so the trust has become more global in nature. A differentiator here is the use of private equity, while fees are competitive. Niven’s proven to be a safe pair of hands and can draw on considerable resources within the group so we maintain our Morningstar Analyst Rating of Silver.

 

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
Foreign & Colonial Investment Trust Ord680.00 GBX-0.44
JOHCM UK Growth GBP A3.24 GBP0.19
JPM China C (acc) USD38.76 USD-0.30

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK