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Morningstar's Manager Check Up

REAFFIRMED RATINGS: Morningstar fund analysts reveal why they positively rate offerings from Old Mutual, BlackRock and Schroders

Jonathan Miller 5 September, 2018 | 12:33PM

 

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

The Old Mutual Europe ex UK Smaller Companies is run by Ian Ormiston who has over 20 years’ experience in European equities. The fund was launched in nearly four years ago, shortly after he joined the group and he applies the same approach as in his previous role. This process can encompass both sustainable growth and more valuation-orientated plays.

The portfolio tends to have a quality tilt, but Ormiston will also hold some more cyclical names where there is a margin of safety in terms of valuation and balance-sheet security. This is part of his mindset that seeks to build a balanced portfolio. We draw conviction from Ormiston’s stock-picking skills, the ability to execute his process over time and strong longer-term track record, so the fund retains a Morningstar Analyst Rating of Bronze.

Mike Prentis has been a feature on the Blackrock Smaller Companies investment trust (BRSC) since 2002, and in April 2018, the board formally appointed Roland Arnold as comanager. The two are well known to each other, having been colleagues since 2005. While no formal statement has been made regarding the longer-term manager arrangements here, it’s reasonable to assume there’s an element of succession planning in Arnold's appointment.

The duo looks for sustainable growth companies that appear undervalued and which show five key factors: quality of the management team, strong market position, cash generation, a record of earnings per share growth, and a strong balance sheet. With fees coming down and performance fees removed, we feel there’s a lot to like. The solid process, very capable pair of hands in a well-resourced team, as well as performance being robust over all time frames, support our continued Morningstar Analyst Rating of Gold.

Andrew Rose has run Japanese-equity portfolios since the 1980s and as manager of the Schroder Tokyo fund is one of the most experienced in the peer group. He is supported by a strong and broadly stable team of Tokyo-based analysts and portfolio managers. Rose has adhered to the same process throughout his career. He has a forward-looking view and prefers companies that he believes have the potential to surprise on the upside over a two to three-year period.

A sensible awareness of macro trends and market behaviour are also displayed, which, in our view, is a strong complement to his bottom-up stock-picking. His measured approach tends to result in a nicely balanced portfolio, and the focus on valuations and fundamentals has helped keep the fund comfortably ahead of its benchmark and Morningstar Category average. We continue to have a high level of conviction in the manager, the supporting team, and the disciplined approach. The fund therefore retains a Morningstar Analyst Rating of Gold.

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
BlackRock Smaller Companies Ord1,390.00 GBX0.14
Merian Europe ExUK Smlr Coms R GBP Acc15.82 GBP-0.47
Schroder Tokyo Z Acc £112.20 GBP0.00

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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