Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar analysts positively rate Bankers Investment Trust, MFS Meridian Global Equity and Legg Mason Royce US Small Cap Opps

Jonathan Miller 11 April, 2018 | 3:26PM
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Jonathan Miller: Welcome to the Morningstar Manager Check-up, for updates on our latest fund research.

The MFS Meridian Global Equity fund is going through a changing of the guard with veteran manager David Mannheim retiring. This was clearly communicated to us a good while ago and we believe comanager Roger Morley has shown the qualities needed to apply one of the most sensible and repeatable processes around. He’s backed up by Ryan McAllister, who as part of this change became a full-time co-manager in March 2017.

The process sticks to stock and industry research, patiently seeking companies that are reasonably priced and can grow sustainably. Within that, identifying competitive edges such as proprietary products, pricing power and management quality are key. This low turnover approach has seen long term success, huge assets of around $75 billion and is soft closed.

Even so, the strategy deserves top billing given its all-round strengths and the ongoing presence of an excellent portfolio manager. Its high fees are a negative point for us, but the fund retains its Morningstar Analyst Rating at Silver.

The Legg Mason Royce US Small Cap Opportunity fund is managed by Bill Hench and Buzz Zaino. In what is a specialised and volatile approach, the duo invest in unloved small caps that are going through rough patches. They look for four distinct types of companies: undervalued asset plays, turnaround stories, special situations – such as firms coming out of bankruptcy – and busted IPOs.

The portfolio tends to hold around 300 stocks, with nearly 60% in micro-caps.  It’s deep-value stocks, with high volatility being par for the course, but overall, the managers' strict adherence to the discipline and talent for finding turnaround situations has made this fund a long-term winner. It therefore maintains its Morningstar Analyst Rating of Bronze.

Fund manager Alex Crooke brings a wealth of experience at the helm of Bankers Investment Trust (BNKR). Having run it since 2003, Crooke determines the asset allocation in concert with the board. He then draws upon the expertise of fellow managers at Janus Henderson to populate the various geographic sleeves with concentrated portfolios.

The portfolio is 75% invested outside the UK, then when it comes to the UK there’s a small and mid-cap bias. Crooke gives each manager a specific income target, as dividend growth is an important feature here. He oversees this and makes sure the portfolio produces enough in the way of dividend income. The result being the trust has increased its pay-out for 50 consecutive years.

When it comes to fees here, they’re at the cheapest end of the peer group here. Investors can be assured they are receiving high quality and active management here for a very competitive fee. With a number of positives as part of our qualitative assessment, the fund retains 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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About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK