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Morningstar Manager Check-up

Morningstar head of fund research Jonathan Miller talks senior editor Holly Black through fund ratings for JPMorgan, T.Rowe Price and Montanaro

Holly Black 17 July, 2019 | 12:02AM



Holly Black: Welcome to the Morningstar Manager Checkup. I'm Holly Black with me in the studio is Jon Miller, he's Head of Fund Research at Morningstar.


Jonathan Miller: Hi Holly.

Black: You are going to tell us about few funds you've been looking at over the past few weeks. Where would you like to start?

Miller: That’s correct. So let's start with Latin America. So a fund we have under analyst coverage. So we go and meet the managers and assess them through our pillars is JPM Latin America. So we rate this fund as Bronze. We've got a positive view on it and there's – that's all centered around people, process, we've also got positive views there. The manager has been there around 15 years or so, so he's got a long tenure in Latin America and backed up by a colleague Sophie Bosch de Hood they work well together. As well as a team of analysts dedicated to the region. Plus the wider emerging market team we like at JPM so quite a few things coming together that we like on the people side there.

Black: So for an investor who's interested in emerging markets, focusing specifically on Latin America has been a bit of dicey bet over the past few years.

Miller: We had more downs than ups, let's say. We are not making asset allocation course, we are trying to say what we like in certain areas following our research approach. There the process is looking into small caps a little bit, I don’t want to stress that they're overly going into small caps, but in a market that’s two-thirds Brazil and about 25% Mexico. Managers have to take a bit of risk away from the benchmark to try and outperform and with their quality growth approach looking for few ideas off benchmark that have tended to work, finding some higher quality growth areas. We think that comes together to give an overall positive view which is why we have a Bronze rating on JPM Latin America.

Black: Super. And you've been downgrading funds recently as well.

Miller: Yes, so let's pick up one on that side. T. Rowe Price Global Technology, we want to stress that it’s a manager change that’s reshaped out view. So the manager that we liked had been there quite a while and had helped us create an overall positive view taking us to Silver on the strategy. That manager departing and someone taking over has actually ended up moving it to neutral.

Black: It's quite weird to hear you're downgrading funds in an area - technology - that’s done so well and been so popular.

Miller: Well technology yes has had it's more ups than Brazil. But again we are not making calls of what might happen in a certain area in the future. It's all about the strategy as a whole, so there, T. Rowe Price we've usually seen them be quite good at succession planning. Telling us who might be coming up through the ranks. In this case Alan Tu he's part of the team been there five years at the group. He's based out in San Francisco. So quite near Silicon Valley. His work beforehand, before taking on portfolio manager role was centered on knowing around 30% of the fund. So we've got to reassess and say we'll he's still got to take full coverage knowing more areas than he's been used to, also how is the approach going to be executed, manager before was actually quite high turnover, trimming areas of the market that had rapidly risen and also adding to areas where valuation opportunities were in place. So there's lot more moving parts from being an analyst to being a portfolio manager and that really has centred around the reason why Neutral we feel is a fair view at the moment on that strategy.

Black: Okay and what's the last fund we are looking at?

Miller: The final one is Montanaro European Smaller Companies Investment Trust. So although it's called European, this is Europe ex-U.K. So smaller companies outside the UK and the European region. Now this house is run by Charles Montanaro. But the manager here is George Cooke. So Charles passed on the reigns to George Cooke quite recently and although I would like to add the Charles Montanaro is like key part of the business, the approach and the investment committee as well. So he's got ideas coming in but really, it's now George Cooke's portfolio but there is a certain amount of continuity there as well.

Black: And you are maintaining your rating on that one.

Miller: Yes, we’re maintaining it at Bronze. I would say a couple of years ago where there was a bit of turnover in the team, but we feel they've overcome that. So with George Cooke taking the reigns there's still a heavy emphasis on research at Montanaro. They’ve got a team of 10 analysts kicking the tyres, going around to see companies around Europe and we like the team approach there when bringing ideas forward to a list of where the investment committee wants to employee them. Quality growth as well so you won't see deep cyclical companies coming in here. So it tends to protect quite well on the downside, which we saw  last year actually where the fund performed particularly well. So we think there's some good things coming together there after a bit of change going on internally not drastic change, but all in all we feel Bronze was positive and that we feel is the right view for where we are now.

Black: Thank you so much for your time.

Miller: You are welcome.

Black: And thanks for joining us.


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About Author

Holly Black  is Senior Editor, Morningstar.co.uk

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