Morningstar's Manager Check-Up

REAFFIRMED RATINGS: Why Morningstar fund analysts positively rate funds from TB Amati, Capital Group and MFS

Peter Brunt 20 March, 2019 | 8:49AM
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Peter Brunt: Hi there, and welcome to our Morningstar Manager Check-up, where we will run through three of our rated strategies that have recently undertaken a review and maintained their ratings.

First up is Bronze-rated TB Amati UK Smaller Companies and has been managed by Amati co-founder Paul Jourdan since 2000. While Jourdan lost the support of co-manager Douglas Lawson in August 2018, he remains ably supported by co-managers David Stevenson and Anna Wilson, who joined in 2012 and 2018 respectively. The new team dynamic introduces some uncertainty, but we retain a positive view of the experienced team and Jourdan’s long tenure here. The team seek companies with a clear competitive advantage, sustainable growth, and high returns on cash invested. The team has deep knowledge of AIM stocks, which are a particular area of focus for the portfolio, providing a potential source of added value over peers. Overall, the strategy has a smaller market-cap profile than the UK small-cap category average, with a more substantial allocation to micro-caps. Jourdan and team have built a very strong long-term record, with the fund comfortably outperforming both its benchmark and the category average. As one would expect given the bottom-up approach, stock selection has been the primary driver of outperformance over the long term.

Next up is Gold-rated Capital Group New World, which we believe takes a pioneering approach to emerging-markets investing. The strategy was launched in June 1999, making it one of the first to use a risk-averse, revenue-centric process to capitalise on growth in the developing world. The portfolio will always have a minimum 35% invested in direct emerging market equities, but seeks to cushion volatility by combining this with high-yielding emerging market debt and developed market companies with at least one fifth of their revenue or assets deriving from emerging economies. The approach uses Capital Group’s typical multimanager system, here aggregating eight underlying equity managers, one balanced manager, and one fixed-income manager into the overall portfolio. Each manager independently runs a sleeve of the portfolio, which helps to enhance diversification and further mute overall volatility. They are also long-term oriented, so portfolio turnover remains relatively low. The strategy has subjected investors to much less volatility than either the MSCI Emerging Markets Index or typical global emerging-markets peer over a market cycle, leading to strong risk-adjusted long-term results.

Lastly, we look at Silver-rated MFS Meridian European Research. The strategy is managed from the bottom-up and is the purest reflection of the stock research undertaken by the firm’s experienced 11-strong European research team. The resulting portfolio has typically exhibited a quality bias as the team seeks companies with above-average sustainable growth, high-quality returns, and sound management. The team has experienced turnover at times, partly because some analysts progress to portfolio-management roles. This tempers our conviction, though we note that the firm has usually managed these transitions well without impairing stock selection. Long-term performance has been impressive and with resilience in down markets, reflecting the quality bias. Pleasingly, returns have been delivered in a consistent manner over different market environments. In general, performance is driven by individual stock selection, and we draw comfort from the fact that the value added has typically been generated in a broad range of sectors, reflecting the overall quality of research.


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
Capital Group New World (LUX) Z18.17 USD0.16Rating
MFS Meridian European Research W1 EUR22.81 EUR0.62Rating
TB Amati UK Listed Smaller Coms B Acc1,256.39 GBP1.11Rating

About Author

Peter Brunt  is a Senior Fund Analyst for Morningstar UK

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