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Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar analysts positively rate Jupiter Absolute Return, Invesco Perpetual Corporate Bond and Lowland Trust

Jonathan Miller 29 March, 2018 | 11:44AM



Jonathan Miller: Welcome to the Morningstar Manager Check-up for three fund updates from our research team.

We start with Jupiter Absolute Return, which is primarily run as a long-short UK and overseas equities fund, with some flexibility to use other assets for hedging equity risk. It’s managed by James Clunie who over his career has shown a specialisation in short selling. His ideas come from working through a vast array of quantitative data, waiting to execute ideas when he sees a catalyst. On the short side for example, overvaluation, low quality and investor positioning help him shape ideas.

What you tend to get here, is an approach that comes to the fore when equities fall. It was therefore no real surprise that in a rising market last year, the fund showed a negative return. As a diversifier though, this is where the fund stands out as it has a very low correlation to equities. Although returns will generally come in lumps, Clunie has built credibility as a one of the few managers with skill in short selling and the fund retains a Morningstar Analyst Rating of Bronze.

The Invesco Perpetual Corporate Bond fund is comanaged by Paul Causer and Michael Matthews. The duo has worked together for over 20 years and over time resources have been beefed up, making the team one of the strongest in this space. It’s their macroeconomic outlook that guides the portfolio's positioning, although they also identify opportunities outside the central top-down view.

This gives flexibility and the managers can make punchy calls, such as high subordinated financials exposure or a willingness to adjust the portfolio’s sensitivity to interest rate changes. This hit the fund in 2016, but since then it’s been back on form. The implementation of this bold approach has adeptly been used to investors' advantage over the long term. We see a host of positives around the managers’ experience, and the effectiveness of their high-conviction approach. This gives us the confidence to retain the fund’s Morningstar Analyst Rating of Gold.

James Henderson has demonstrated notable success managing the Lowland Investment Trust since 1990. This is a multi-cap growth- and income-focused trust. But the focus isn’t just on the income component of the portfolio. It’s actually to aggressively grow the capital, as a larger capital base should allow for significant dividend growth. The neutral position is between 30% and 50% in larger companies with the balance in mid- and small-cap stocks.

This generally means a bias towards smaller companies and areas that are under-researched. When it comes to support for Henderson, Laura Foll was recognised for her input and appointed comanager in November 2016. We think this partnership brings together differing and complimentary skills, and it’s genuinely a collegiate effort.

All of which will help the “mildly contrarian” multi-cap premise persist. Attractive fees are a further element to like here and we reaffirm 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.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Invesco Corporate Bond UK Y Acc247.46 GBP0.09
Jupiter Absolute Return I Acc52.49 GBP-0.58
Lowland Ord1,270.00 GBX-1.93

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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