Fund in Focus: SLI Global Smaller Companies

Morningstar fund analyst Pete Brunt talks to Emma Wall about the new rating for SLI Global Smaller Companies

Emma Wall 27 February, 2018 | 10:03AM
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Emma Wall: Hello, and welcome to the Morningstar series, "Ask the Expert." I'm Emma Wall and I'm joined today by Morningstar Fund Analyst, Pete Brunt, to discuss a new fund under Morningstar analysis.

Hi, Pete.

Peter Brunt: Hi, Emma.

Wall: So, what is the new fund?

Brunt: So, we've just given a rating to the Standard Life Investments' Global Smaller Companies Fund. We gave it a rating of Bronze. Our knowledge of Standard Life Smaller Companies investment process is pretty strong because we've covered the UK Smaller Companies Fund for quite some time. And really, this is building on that UK process and expanding it to a global opportunity set including companies in developed markets and also in emerging markets.

Wall: And how does it compare to other funds in this space?

Brunt: So, one thing that they have done is, they have kept it scalable. So, it doesn't invest in companies that are really down the micro-cap part of the spectrum and it's got quite a strong growth tilt. That's pretty typical of what we expect from Standard Life Investments Smaller Companies part of the process.

One of the things that we really like about the fund is that stock selection has been the main driver of returns. So, just a bit of background. Harry Nimmo is a guy who is very instrumental and a name that most people will recognise in small-cap investing, and he was also instrumental in setting this global strategy up. It's actually managed by a gentleman called Alan Rowsell. He has been on the fund since launch. They initially co-managed it and he became the sole manager at the end of 2016. So, whilst we would normally like to see the fund managers stay in place for a long time, we have confidence in the fact that he has been on the fund since inception and he still actually has Harry Nimmo to draw upon and six of the members of the small-cap team. So, overall, we feel that the resources backing this fund are strong.

Wall: Now, you have talked about a couple of the Ps there, the people and the process. What about the Price pillar? How does that compare?

Brunt: So, we actually find the price for this fund a little bit expensive. Its clean share class falls within the second most expensive quintile of the category when we are looking at other clean share classes. So we actually would mark that as a negative. But overall, in the bigger picture, we feel that the fund is able to add in more than enough alpha to overcome that hurdle of a slightly higher fee. So, as you mentioned, it's one pillar. But in the overall picture, we feel there is enough there to give us a positive view.

Wall: And what about the Parent, because it's a company that has been in the news quite a lot over the last year?

Brunt: Yeah. It's a totally fair point. So, obviously, Standard Life and Aberdeen merged, and they now have formed a new mega company; it's very, very big. Obviously, there's uncertainty that comes with that. Jobs are often lost. They have already been. And that is reflected in our Neutral view on the parent.

That said, this fund in particular and the Smaller Companies franchise is very, very strong within Standard Life Investments. So, in that backdrop, in that context, we feel very confident that the franchise itself is safe, especially within the global small company space. So, overall, we feel pretty comfortable with that.

Wall: Pete, thank you very much.

Brunt: You're welcome. Thank you.

Wall: This is Emma Wall for Morningstar. Thank you for watching.

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
abrdn Global Smaller Coms P1 Acc175.61 GBP-0.67Rating

About Author

Emma Wall  is former Senior International Editor for Morningstar

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