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By Jonathan Miller| 6-14-2017 3:00 PM

Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar's Jonathan Miller explains how fund analysts rate

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Jonathan Miller: Welcome to the Morningstar Manager Check-up for the latest from our fund research team. We start with the Aberdeen Indian Equity fund, where the team’s Asia head, Flavia Chang, leads a large analyst team who contribute to the fund. Quality and value are the team’s twin mantras, as they look to sustainable business models, high returns on capital and strong balance sheets. A heavy emphasis is also placed on management and corporate governance.

We think this is an important factor given the heavy influence of family run-firms in listed Indian equities. The end result is a punchy portfolio of around 30 names and we like the patient approach with around 20% annual turnover. This is a competitive space, where we believe the fund can hold its own and we’ve reaffirmed its Morningstar Analyst Rating of Bronze

Next up is the Investec UK Alpha fund managed by Simon Brazier since late 2014. Brazier blends bottom-up stock research with top-down analysis as he believes a clear understanding of the macro and thematic background is important. This research is backed up by a dedicated analyst team, where their valuation analysis considers both the upside potential and downside risk of a stock.

Brazier’s constantly seeking to balance out the risk/reward opportunities, not only at the individual stock level, but more importantly at an overall fund level. We see this very much as a core offering for UK equities, where Brazier has a sufficiently strong team to enable him to execute his investment process effectively. The fund retains its Morningstar Analyst Rating of Bronze.

Finally the BlackRock Smaller Companies (BRSC) investment trust, where Mike Prentis has been at the helm for 15 years. He invests very much at the lower end of the UK stock market and also incorporates AIM stocks to the tune of 40% of the portfolio. IPO’s are selectively embraced, with recent examples being Joules, Premier Asset Management and Warpaint.

This is very much a bottom up approach, with the team meeting 750 companies a year, but there are certain distinct themes. This includes growth businesses with predictable revenues, cash flow compounders and innovation. We believe Prentis is an extremely capable manager in this specialist space, with a solid process and a strong team to support him, so the trust maintains its Gold Rating.

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.

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