Morningstar's Manager Check Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate Artemis UK Smaller Companies, Sanlam Financial and Witan Investment Trust

Jonathan Miller 20 June, 2018 | 8:57AM
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Jonathan Miller: Welcome to the Morningstar Manager Check-up for fund updates from our research team.

Artemis UK Smaller Companies has seen Mark Niznik involved as a portfolio manager for over ten years and in 2011 he assumed sole responsibility for the fund. When looking for strong business franchises, he assesses predictability of earnings, solid balance sheets and strong returns on capital. Free cash flow yield is an important measure and the overall valuation is key as Niznik doesn’t want to overpay for growth.

Over the last couple of years we’ve seen some higher-growth stocks being reduced on valuation grounds, while slightly lower-growth names have been added to where more-reasonable valuations are being found. The portfolio is typically biased toward the smaller end of the market, with an average market cap meaningfully lower than the category average. Niznik has been consistent over time in terms of the types of businesses he looks for and executed his approach to good effect, so we reaffirm the fund’s Morningstar Analyst Rating of Silver.

Sanlam Financial has been managed by Kokkie Kooyman since 2004. He’s an experienced financials analyst and portfolio manager, with a reasonable level of analyst resource backing him up. Kooyman invests in his best ideas, paying little attention to the benchmark. This can result in volatility over shorter-term time periods, especially because of his willingness to invest in emerging-markets and smaller-cap stocks.

But we think this is underpinned by a sound process, which is primarily focused on buying stocks that he believes to be undervalued given their growth prospects. This can include turnaround stories as well as material holdings in growth markets, which makes the fund a punchy offering in this space. But investors have been rewarded for that extra risk over the long term and we still think positively about this offering, so it maintains its Morningstar Analyst Rating of Bronze.

The Witan Investment Trust (WTAN) has Andrew Bell and James Hart leading this offering. Both have relevant experience and helped hone this global multimanager approach which was in place before they joined. When selecting underlying managers the key criterion is they must be able to add value to the portfolio through stock picking and adherence to their investment style.

An interesting element is that up to 12.5% of the portfolio is managed directly by the Witan team. This sleeve encompasses attractive assets or specialist investment themes such as private equity or mining. A recent development is that 2.5% of this budget can be invested in funds run by younger managers deemed as rising talent. When put together, there’s an active share of around 80% in the portfolio and with a well-executed strategy, competitive fees and solid results, the fund 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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About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK