Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar's Jonathan Miller explains why analysts positively rate Man GLG Japan Core Alpha, Fidelity Strategic Bond and Aberdeen Emerging Markets

Jonathan Miller 18 January, 2017 | 9:01AM
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Jonathan Miller: Welcome to the Morningstar Check-up where we keep you informed of the latest ratings from our fund research team.

Starting with the Man GLG Japan Core Alpha Fund, which maintains the top analyst rating of Gold. What particularly stands out for us is the consistency of the process and stable team led by Stephen Harker. The investment philosophy is contrarian with a value-driven approach looking at undervalued companies in the large-cap space. The focus is on quality companies that are dominant in their sectors and that features strong management.

But ultimately, it's the level of pricing anomaly that drives the stock picking. This leads to significant stock and sector bets, which takes the portfolio away from the index. The value bias does lead to higher volatility than the index, but on a forward-looking basis, we continue to believe in the repeatability and execution of the process. And this gives us positive view for continued outperformance over the long term.

Next up is the Fidelity Strategic Bond managed by the long-standing Ian Spreadbury where we've reaffirmed the Silver rating. What Spreadbury is looking to achieve is deliver income, manage volatility and provide diversification away from equities. Around half the fund is in corporate bonds. With a near equal split between high-yield and government bonds making up most of the portfolio, there's also a small bit of EM debt in there.

The duration of around 4.5 years is at historical low. It's worth noting thought that there's a tendency for funds in this space to be lower than this at the moment. But Spreadbury is in slow-growth and low-inflation camp and sees duration as a way of protecting from systemic risks, while crucially maintaining that diversification from equities.

Finally, Aberdeen Emerging Markets, a fund we retain at Silver. As a part of the qualitative assessment we carry out, we continue to believe that there's a number of positives here for the fund. The well-resourced team led by Devan Kaloo, a consistent process based on quality and valuation as well as a long-term focus. Capacity concerns were on our mind in the past and a move was made to control the fund's size by introducing a 2% entry charge for investors. We believe the capacity is less of an issue now as the fund has been in an outflow mode for a few years.

Despite the negative sentiment though in the asset class, the team there, they've stuck to knitting. They've outperformed the index three years in a row and that was after underperforming by 4.5% in 2013. Investors though still have that 2% entry charge today. That's likely to put people off. But for those still holding the fund, our view is that positives around the process and stability of the team make us restate the fund's 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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
ASI Emerging Markets Equity I Acc993.09 GBP1.28Rating
Fidelity Strategic Bond W Inc127.70 GBP0.16Rating
Man GLG Jpn CoreAlpha Eq D JPY21,794.64 JPY0.04Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK