Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar fund analysts reveal why they positively rate Kames Corporate Bond, Invesco Perpetual Monthly Income Plus and JPM EM Income

Jonathan Miller 25 July, 2018 | 8:58AM

 

 

Jonathan Miller: Welcome to the three recent fund updates from our manager research team.

JP Morgan Emerging Markets Income fund has seen Omar Neyal form part of the management since launch nearly five years ago. He’s supported by a wider team, where the 18-strong global emerging-markets research team, as well as 12 analysts on the Greater China desk, are the main sources of information.

Analysts conduct detailed work to assess the quality of a business before calculating expected returns. The structured approach assesses five-year growth, dividends, change in valuation, and currency, which helps Neyal in his stock selection.

There’s flexibility to invest in stocks with different yield characteristics, meaning the manager has a better chance of achieving income and capital growth. However, this fund has always offered a genuine yield premium versus the index. Strong resources and a robust process make this an attractive offering, meaning the fund keeps its Morningstar Analyst Rating of Bronze.

The Invesco Perpetual Monthly Income Plus fund has a remit that involves being around 80% invested in bonds, with the remainder in equities. Paul Causer and Paul Read run the fixed income side and they’re two of the most experienced and successful fund managers in the UK. They invest across the fixed-income Spectrum and Valuation is the primary consideration, and will only take risk when they believe they are being rewarded for doing so.

This can lead to aggressive positioning which reflects them backing their convictions. Subordinated financials are around a third of the total portfolio and high yield is at the 30% mark. Most of these holdings mature in two years, showing the duo doesn’t want to take much interest risk. Equities, at 13% of the portfolio has an emphasises on income and dividend stability. We like the experience and conviction of the managers, which has served investors well over the long term and the fund retains its Morningstar Analyst Rating of Silver.

There was a change about a year ago at the helm of the Kames Sterling Corporate Bond fund. Iain Buckle remained as co-manager but a departure saw Rory Sandilands become a named manager alongside Buckle. The managers benefit from being part of an experienced and collegial team of 29 fixed-income investment professionals who together formulate top-down views. The duo also contributes to the team’s investment-grade credit research effort.

They adjust the fund’s exposure based on six sources of alpha; interest rate sensitivity, yield curve, asset allocation, rating preference, and sector and bond selection. Historically, the portfolio has been true to its high-conviction nature, remaining decently concentrated in individual issuers but well-diversified across sectors.

Despite short-term challenges to performance from its underweight duration stance, the fund’s long-term track record remains strong. Overall, the experienced team behind it and well-executed process continues to support our conviction and the 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
Rating
Invesco Monthly Inc Plus UK Z Inc210.49 GBP0.14
JPM Emerging Markets Income C Net Acc0.84 GBP0.60
Kames Sterling Corporate Bond GBP B Acc89.00 GBP-0.30

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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