Morningstar's Manager Check-Up

REAFFIRMED RATINGS: Why Morningstar analysts positively rate funds from Lindsell Train, Merian and Capital Group  

Jonathan Miller 13 March, 2019 | 1:13PM

 

 

Jonathan Miller: Welcome to three fund updates from our research team, as part of the Morningstar manager check-up.

Firstly, the Lindsell Train UK Equity fund has been managed by Nick Train since launch in 2006, but has a track record with the same mandate, going back to 2000 via the Finsbury Growth and Income investment trust. The crux of Train's investment philosophy lies in the belief that a highly concentrated portfolio of high-quality, cash-generative, strong, and easily understood business franchises will outperform the market and reduce volatility over the long term.

He carries out in-depth fundamental analysis and we believe his strengths lie in the deep understanding of company strategies and his ability to see through the noise, with very low turnover. The stock-specific and unconstrained nature mean there’s sizable sector and market-cap deviations from the index and peers. There’s an unwavering adherence to the investment philosophy and strong stock selection have resulted in considerable long-term success, so the fund holds a Morningstar Analyst Rating of Gold.

Next, is the Merian UK Mid Cap fund, managed by Richard Watts. He’s been at the helm for a decade, but been involved since 2006. He uses a top-down element, which then gives a framework for his growth-orientated bottom-up stock selection. This is where the team is involved, looking for companies that demonstrate the ability to grow earnings faster than the market average for an extended period. Watts then makes his own assessment on the relative attractiveness of individual names. More recently he’s tended to continue holding positions in highly valued stocks, but he's cognisant of earnings momentum moving against him. While this means the fund sold off more than the market in Q4 last year, he still has conviction in his higher growth stocks. We continue to back this approach over the long term, with a Morningstar Analyst Rating of Silver.

Finally the Capital Group Japan fund has three named managers, plus a sleeve that reflects the best ideas of the analyst team. The three managers each follow their own investment style and approach, which the group has purposefully selected in order to achieve a portfolio with an optimum blend of styles and market-cap exposure. While they undertake a significant amount of research themselves, they can also draw on the 16-strong analyst team for investment ideas. When you bring this all together, the aim is to mitigate style bias and ensure stock selection is the main driver of returns. It also means that given the stock specific nature of the approach, there can be large deviations from the index. Based on the experienced and stable team, plus significant analytical resources, the fund holds a 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.

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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