Morningstar's Manager Check-Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate Fidelity Special Situations, Schroder Global Smaller Companies and Scottish Mortgage investment trust

Jonathan Miller 7 November, 2018 | 9:23AM
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Jonathan Miller: Welcome to the Morningstar Manager Check-up for three fund updates from our analyst team.

Fidelity American Special Situations has been managed by Angel Agudo since December 2012 and benefits from the support of 18 dedicated analysts. Agudo’s approach seeks out undervalued companies, which means those that have gone through a period of underperformance, but little value is ascribed to their recovery potential. He generally starts with the worst-case scenario for each company and looks for sufficient downside protection and a margin of safety in the valuation.

The fund’s performance can be lumpy given the unconstrained nature. In addition, stocks such as Amazon, Apple and Google tend to not be held whereas they’ve rallied significantly in recent years. The manager’s rigorous investment approach and attention to risk management, make this fund a solid proposition for investors seeking value exposure to US equities. We’ve therefore reaffirmed the fund’s Morningstar Analyst Rating of Bronze.

Schroder ISF Global Smaller Companies’ is led by two seasoned managers, in Matthew Dobbs and Richard Sennitt. They implement stock ideas from four regional teams in different parts of the world, who are led experienced portfolio managers.

The small-cap teams at Schroders practice a long-term bottom-up approach and target quality companies that show above-average earnings and cash flow growth prospects at a reasonable price. The lead duo has little bearing on individual stock positions, and for most part they will hold the same securities as the local portfolio managers. Their main input is at the regional allocation which can deviate by plus or minus 7% relative to the developed market smaller companies Index.

Over the long term, the fund has been less volatile than the benchmark and peers and outperformance has been driven by strong stock-picking across several regions. Fees are a bit on the high side here, but we retain a Morningstar Analyst Rating of Bronze.

The Scottish Mortgage investment trust (SMT) is managed by James Anderson, with Tom Slater acting as comanager. They can draw on the whole of the 100-strong investment team at Baillie Gifford, to identify high growth companies and hold them for the long term. These companies will often have been new entrants or disruptors into a region or industry, radically changing the landscape and challenging the business model for the traditional incumbents.

The company has long had an element of unlisted stocks, which accounts for around 15% of the portfolio. These have been strong contributors to returns, which have been stellar for the trust as a whole in recent years. The bias to information technology, healthcare, and largely Internet-related consumer cyclicals have also played a part.

This isn't a fund for the risk-averse but does have considerable merit for long-term investors including very attractive fees. With many positives here, the fund maintains its 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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Fidelity American Special Sits W Acc2,595.05 GBP0.43Rating
Schroder ISF Global Smlr Coms C Acc USD315.44 USD0.69Rating
Scottish Mortgage Ord862.60 GBX-0.23Rating

About Author

Jonathan Miller  is Director of Manager Research, Morningstar UK

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