This year, as well as the annual quant awards, we are awarding our inaugural UK Equity Fund Manager of the Year award. This award is based entirely on the work of the UK Fund Research analyst team and recognises one fund manager who had a strong 2009, but whom we also believe will do well for investors in the long term and who has shown himself or herself to be a good steward of investors’ capital.
2009 provided our staff with something of a conundrum. On the one hand, after two horrendous years of markets roiled by the credit crisis, investors finally saw a strong rally that helped them claw back some of their losses. On the other, the rally was led by lower-quality, speculative issues. Hence, the funds that did best were often those that took the most risk. While that happens to have worked well last year, it’s rarely a strategy for sustained success and our own research has shown that investors often misuse higher-risk offerings, buying after runs and selling after downturns.
Our analyst team vigorously debated the pool of nominated managers and we’re confident in saying that we believe them to be among the very best and the most deserving of our award this year.
In addition to this inaugural award, we announce the winners of our 15 quantitative awards that recognise funds and fund groups that have delivered the greatest outperformance, on a risk-adjusted basis, in 2009 and over the longer term. While the performance assessment is biased towards funds’ ability to deliver in 2009, these awards place significant stress on limiting downside risk and delivering strong returns relative to appropriate peer groups over the three- and five-year periods.
Morningstar UK Equity Fund Manager of the Year
Alastair Mundy of Investec UK Special Situations – rated Elite
2009 return: 37.62% GBP
2009 percentile rank in category: 5
Alastair Mundy is a true contrarian. He buys stocks when no-one else has any interest in them and they have been given up as a lost cause. This is when he comes into his own. He looks for stocks that have fallen 50% from their peak (until 2007 this was 30% but he felt it simply wasn’t contrarian enough any more). But he doesn’t want that fall to have happened in the most recent two years as he thinks that can be misleading. He and his team trawl the universe for stocks that meet this requirement and then the analysis begins. Mundy has built his team from scratch and chosen each person to complement the existing skill sets in the team; we think it’s a strong and like-minded group who all share a common investment philosophy.
This philosophy has helped Mundy and the team to produce steady, consistent outperformance over Mundy’s tenure, irrespective of market behaviour. Returns in 2008 pay testament to this: he managed to protect investors’ capital better than most and beat category peers by over eight percentage points. Over one, three and five years, the fund is in the top performance decile. Even better is that the fund doesn’t come at a high cost; costs erode investors’ returns, so we’re pleased to see a TER some 11 basis points lower than the category median.
2010 Morningstar Fund House Award Winners
Best Large Equity House Award 2010 goes to Fidelity International. Well reputed to have a fund for all seasons, Fidelity’s equity fund line-up is not lacking, with over 80 qualifying funds in the UK. But it’s not just about how many, it’s about their performance and both the analyst teams and fund managers are in good shape now and have been for the last few years. This award is testament to their success.
Best Large Fixed-Interest House Award 2010 is awarded to Schroder Investment Management Ltd, for the second year in a row. A reorganisation at the helm of the team gave fund managers more freedom to follow their own conviction, rather than a house view. Winning this award recognises that a strong team has become stronger as a result of the changes.
Best Specialist Equity House Award 2010 is given to First State Investments Ltd, who also won the 2009 award. One of the things we really like about First State is that their products match their skillsets – in other words, they don’t try to have a fund in every category. They even took the unusual step of closing their UK desk some years back as they recognised they didn’t have an edge in a highly competitive space. In Asia and Emerging Markets, however, they have a very clear edge with one of the strongest teams in the industry.
Best Specialist Fixed-Interest House Award 2010 has been won by M&G Investments, another house to win the same award two years’ running. There’s no doubt that the credit team at M&G is one of the best-resourced that we’ve come across. The call by the financials team to cut banks very early on was highly beneficial to investors in M&G’s fixed interest funds and the team goes from strength to strength.
The final fund house award, Best Multi-Asset House Award 2010, also goes to M&G and for the second year running, too. Not only do they have some excellent products on the fixed-income side, but their equity funds are equally compelling. Indeed, Tom Dobell at M&G Recovery was short-listed for our Morningstar UK Equity Fund Manager of the Year award. As well as this fund, we think their Global desk in particular is worthy of mention and several of their funds carry either Elite or Superior ratings.
2010 Morningstar Category Award Winners
These awards are given to the funds with the best risk-adjusted performance within their Morningstar Categories or groupings of Morningstar Categories, subject to qualitative review.
Best UK Large-Cap Equity Fund Award 2010 is awarded to Majedie Asset UK Equity A. Majedie was set up in 2002 and they only manage UK equities. They do it very well – over the five years ending 31 Dec 2009, the fund returned an annualised 10.89%, over double that achieved by the category. The fund is managed by four founding partners of the firm and this stability at the helm has without doubt been a benefit to their investors.
Best UK Mid-Cap/All-Cap Equity Fund Award 2010 goes to JOHCM UK Growth GBP, which is Elite rated by Morningstar. Mark Costar was well positioned ahead of the rally in March last year, with holdings spread right across the cap range, in keeping with his investment style. He has stuck to four basic principles throughout his investing career and it is this discipline which has helped him navigate the volatility in the markets.
Best UK Small-Cap Equity Fund Award 2010 is given to Investec UK Smaller Companies A Inc Net. Philip Rodrigs uses Investec’s 4Factor philosophy to run this fund and his savvy use of technicals in 2009 helped him understand the momentum factor even more and enabled him to generate returns of over 70% last year. But this also follows two more good years at the fund, albeit with more muted returns, and shows adaptability to different market environments.
Best Asia-Pacific Equity Fund Award 2010 is awarded to Veritas Asian A GBP, managed by Ezra Sun. Not only did Sun produce excellent returns in 2009, he also protected his investors’ capital well in 2008, a trait we like to see. Sun’s success last year came in part from recognising a return in strength to the US dollar, despite consensus on it weakening. By showing conviction in his macro themes, it made for a good final quarter to the year.
Best Emerging Markets Equity Fund Award 2010 goes to Aberdeen Emerging Markets A, managed by Devan Kaloo and his team and rated Superior by Morningstar. The Aberdeen process used across all their equity funds favours high quality value stocks, so ordinarily a year like 2009, where momentum played a big part, wouldn’t be their market. But the process led them heavily into consumer stocks and financials and this gave them the boost needed to propel the fund up over 60% by year-end.
Best Europe ex-UK Large Cap Equity Fund Award 2010 is won by MFS Meridian Continental European Eq A2 GBP. This fund is very much a team effort, with Matthew Barrett in the driving seat. In keeping with his fellow winners, he did a great job at limiting losses in 2008 and this stood him in good stead going into 2009. It’s a focused portfolio, at just 33 names at year-end, but this allows him to show conviction in names and it certainly worked well last year.
Best Europe Large-Cap Equity Fund Award 2010 is given to Franklin European Growth A Acc €. Run by Ed Lugo and Michael Clements, this pairing have shown themselves to be highly adept at managing this fund together, at a house we think highly of. Last year was exceptional: they produced capital returns of nearly 50%, some 11 percentage points more than their Morningstar category average.
Best Global Large-Cap Equity Fund Award 2010 is presented to Veritas Global Focus A GBP, managed by Charles Richardson and Andrew Headley. Veritas uses a thematic approach at all their funds and last year saw the introduction of a new theme in the summer: Scarcity and Supply Constraints. This shows adaptability without deviating from their core principles and they have proven their success at using themes over the long term.
Best US Large-Cap Equity Fund Award 2010 goes to CIF US Growth & Income B. Managed by Capital International, a group we think highly of in the US, this fund just beat last year’s winner, Jupiter North American Income, to take pole position and win the award. They run a fairly tight portfolio and have no problem showing conviction in their top picks. This played out well last year and earned them this award.
Best Sterling Corporate Bond Fund Award 2010 goes to M&G Strategic Corporate Bond A Acc, run by Richard Woolnough. Although it has Strategic in the name, this fund does not follow other strategic funds in behaviour. It’s primarily an investment grade fund. Woolnough’s top-down views combine well with the bottom-up analysis conducted by the credit team. In 2009 he waited until the first half of the year to add risk into the fund and this certainly paid off. By year end he returned over 22% to his investors – returns that are normally saved for the equity world.
