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Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate Investec UK Alpha, JP Morgan US Equity Income and Artemis Income

David Holder 3 October, 2018 | 8:10AM



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

The Investec UK Alpha fund is managed by Simon Brazier, who arrived at the group in late 2014 with a strong track record managing core UK equities. He blends fundamental bottom-up stock research with top-down analysis and believes that a clear understanding of the macro and thematic background is important. He also feels that meeting with company management is key to his approach. He’s backed by a team of four analysts as well as resources in the wider group.

The approach is flexible and pragmatic, with Brazier constantly looking to balance out the risk/reward opportunities. Not only at the individual stock level, but more importantly at an overall fund level. Returns under his tenure at Investec have been reasonable, but aren’t quite as impressive as at his previous houses. However, we have high regard for Brazier’s ability as a portfolio manager and we’ve reaffirmed the fund’s Morningstar Analyst Rating of Bronze.

JPM US Equity Income has been managed by Clare Hart since 2008, where she seeks a healthy balance of total return and income. The approach rests on a proven value approach that’s orientated towards quality. This focuses on companies with attractive dividend yields, but places equal emphasis on low pay-out ratios. This is because her research shows that companies boasting both features have outperformed over the long term. While those that pay out too much in dividends, can't increase cash flows and earnings.

Hart looks for firms with consistent earnings, high returns on invested capital, durable franchises, and strong management. The fund’s income might not consistently be towards the top of its category, but it does stay higher than average over time. Plus, what the fund gives up in yield, it has gained in total return. We believe there’s a lot to like here and the fund retains its Morningstar Analyst Rating of Silver.

Artemis Income has been managed by the highly experienced Adrian Frost since 2002, with Nick Shenton joining as co-manager in 2014. Then after a long search, the pair hired Andy Marsh as a third co-manager in February 2018. While Frost has always been the lead manager, and has veto power, Shenton has nicely developed into the role of co-fund. He continues to take on more responsibility and is clearly having a greater influence on the portfolio.

The fund is managed as a core mandate and with its considerable size, doesn’t have the flexibility to invest significantly down the market cap scale.

After a prolonged period of lacklustre returns, it is pleasing to see peer-relative returns improve last year and this year. Outperformance has been driven by strong stock selection, which we believe in part reflects improved team dynamics.

For investors seeking core exposure to UK equities with an above-market dividend yield and growing income stream, we still find this a solid proposition. So, it maintains its Morningstar Analyst Rating of Bronze.

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
Artemis Income I Inc2.51 GBP0.49
Investec UK Alpha I Acc226.42 GBP0.07
JPM US Equity Income C Net Acc3.08 GBP-0.55

About Author

David Holder  is a senior investment research analyst at Morningstar

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