Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar analysts positively rate Threadneedle UK Equity Income, Fidelity MoneyBuilder Income and JPM US Select Equity

Jonathan Miller 7 March, 2018 | 2:47PM
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Jonathan Miller: Hello and welcome to this week’s Morningstar Manager Check-up for our views on three funds we’ve recently reviewed.

Threadneedle UK Equity Income has been managed by Richard Colwell since mid-2012. He used to work with Leigh Harrison on a co-manager basis for over a decade, but when Harrison retired in 2016, we saw it as a blow. Having said that, Colwell has a team of 10 around him, so over all we feel he’s well-supported. The fund is managed with a balanced approach to both income and growth.

Holdings tend to fall into two broad categories: cash flow compounders with a consistently high return on common equity and more contrarian ideas where established companies are experiencing short-term difficulties. This gives the flexibility to invest across growth and value situations.

This pragmatic thinking with a long-term view has served investors well over time, providing strong risk adjusted performance. The combination of manager experience and pragmatism, together with support from a well-resourced team, result in a Morningstar Analyst Rating of Silver.

Ian Spreadbury has been at the helm of the Fidelity MoneyBuilder Income fund since inception in 1995. Then in 2015, Sajiv Vaid, a well-respected name in the space joined as co-manager, which we saw as a strong addition.  This is a UK corporate bond offering, driven by the duo’s top-down views, with a reliance on Fidelity’s well-resourced research platform for bottom-up ideas.

Spreadbury built the team and designed the investment process, so we feel he’s able to get the most out of the analysts in place. The managers have retained a cautious stance in recent years based on their expectation of low global economic growth and low inflation. Despite recent underperformance, owing to the underweight duration stance and sector positioning, the fund’s long-term record has remained outstanding.

We see this as proof of the tried and tested process implemented by Spreadbury through many credit cycles, meaning the fund holds a Morningstar Analyst Rating of Gold.

The set up on the JPM US Select Equity fund sees Scott Davis run about two thirds of the portfolio, the analyst team’s best ideas make up 25% and Susan Bao handles the remaining 10%. The process sees sector deviation rarely go 2% wider than the index and stock picks are based on the analyst team’s proprietary dividend-discount model. With around 150 holdings, the portfolio’s well-diversified and the top 10 positions make up just 20% of assets.

Ultimately this is designed to outperform incrementally, primarily through stock selection. Results testify to the effectiveness of a robust process, skilfully executed by a strong team of portfolio managers and analysts.

The fund’s low expenses are an additional edge and we see this as a sound core holding that maintains its 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
CT UK Equity Income Z Inc GBP1.64 GBP-0.74Rating
Fidelity Sust MoneyBuilder Inc W-ACC-GBP1,294.01 GBP-0.23Rating
JPM US Select C Net Acc9.91 GBP-0.58Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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