Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar's Jonathan Miller explains why analysts positively rate Jupiter Distribution, Lowland and Invesco Perpetual Monthly Income Plus

Jonathan Miller 8 February, 2017 | 3:39PM
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Jonathan Miller: Welcome to the Morningstar Manager Check-Up for the latest ratings updates from our fund research team.

We start with the Jupiter Distribution Fund, which we like for its emphasis on capital preservation and a sustainable monthly income. It retains its analyst rating of Bronze and has at least 65% invested in bonds. There's a bias here towards higher-quality corporates and government bonds with Rhys Petheram running this part. Alastair Gunn then looks after the equity side, which is around 30% of the portfolio. And our analysis shows there's a value bias on this side with holdings such as BP, Shell and HSBC. The duo meets companies together and then decide jointly if the best opportunities are through a bond or the equity. Given the emphasis on capital preservation, volatility has been lower than peers and security selection has been the primary driver of performance.

Next up is the Invesco Perpetual Monthly Income Plus Fund, which is 80% invested in bonds and the remainder in equities. Paul Causer and Paul Read run the bonds element with their valuation-driven approach having little regard for benchmarks. So, what you get are large sector biases and aggressive positioning. This has particularly been the case with subordinated financial debt, which is pretty rewarding over the long term. More recently though, exposure has been pulled back to a third of the fund as the two Pauls have been getting more cautious. This is also seen in their outlook on duration and interest rates. Duration stands at 2.6 years. On the equity side, Ciaran Mallon has an emphasis on stable income and dividend earners. So, he prefers areas like tobacco and utilities. We like the conviction of the managers and the income generation. So, we reaffirm our analyst rating of Silver.

Last but not least, the Lowland Investment Trust where James Henderson's tenure stretches back an entire 27 years. He invests across the U.K. stock market, but with a bias to small and mid-caps. An income component is part of the approach and this is seeing the Board impressively increase the dividend in every year, bar one, since 1972. It's also fairly aggressive in looking to grow capital, the thinking being that a larger capital base should allow for dividend growth. When you bring the gearing into play, a core of mid-cap industrials and the small-cap element, investors need to be aware of the volatile ride. There's also been a recent development with Laura Foll appointed as co-manager in November. She has assisted Henderson for four years and we think this is a positive development. So, all told, we maintain our 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
Invesco Monthly Inc Plus UK Z Acc332.74 GBP-0.05Rating
Jupiter Distribution I Acc118.62 GBP-0.29Rating
Lowland Ord1,316.77 GBP-3.53Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK