Morningstar Manager Check-up

VIDEO: Morningstar senior analyst Samuel Meakin explains why three funds have had their Silver Analyst Rating reaffirmed

Holly Black 18 February, 2020 | 10:15AM
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Holly Black: Welcome to the Morningstar Manager Check-Up. I'm Holly Black. With me is Samuel Meakin. He is a senior analyst at Morningstar.


Samuel Meakin: Hi.

Black: So, we've got three funds to check up on today. Where should we start?

Meakin: Well, actually, all of the funds I'm talking about today have recently had their Silver ratings on the clean share classes reaffirmed by Morningstar analysts.

Black: Which is quite an achievement because since the revamped methodology we've seen quite a few downgrades.

Meakin: Yeah. So, with the new methodology, there's a greater emphasis on fees which can result in some of the share classes going down, as you say, and also an emphasis on benchmark relative performance as well as category relative expected returns.

Black: Okay. So, what's our first silver medallist?

Meakin: So, the first one is Threadneedle UK Equity Income. It's managed by Richard Colwell. He is a very experienced portfolio manager in the UK equities sphere. He is backed by a well-resourced and experienced team. And with about 30 years of investment experience, he has seen the vicissitudes of market cycles over time. So, we think he is well placed to use that experience here.

Now, in terms of the approach, as the name of the fund suggests, this is an equity income mandate. But there is a focus on total returns here as well. So, what we've seen is that it tends to be one of the lower yielding ones in the equity income category. But we like the approach. It's long term, it's low turnover, and it's backed by strong fundamental research from the team.

Black: But even if it is a low yielder, it stayed in the category. Because over the past few years, some equity income funds have been booted out because they haven't met the yield requirement.

Meakin: Yeah, that's right. And that's clearly not been the case here. It remains in that equity income category.

Black: Okay. What's fund number two?

Meakin: So, the second fund is T. Rowe Price Continental European Equity. Again, very experienced manager with around 30 years of experience once more. Again, backed by a well-resourced research team. The manager's name is Dean Tenerelli. And what he is looking for in his companies is quality and by that it means companies that can maintain superior profitability across the market cycle. But he has also got an eye on valuations as well. So, the result is a portfolio that displays quite a balanced profile across the sort of growth value spectrum as it were. And the outcome of that – it's been a consistent relative return profile over time apart from one short blip in 2016. But the overall profile has been consistent with our expectations of the approach which helps us to build conviction.

Black: It's quite hard to create consistent level of returns if you have got a value slant, because it's been a tricky place to be?

Meakin: Yeah. Well, this is a balanced portfolio, as we say. So, whilst he keeps an eye on valuations, it falls in the sort of blend core like category. So, that's helped him build that consistency.

Black: Okay. What's our final fund?

Meakin: Final one is Artemis European Opportunities. Now, this one is a bit different because there's no large team of analysts. It's basically the two comanagers working together. But what they do is they can quickly screen down the number of stocks they're looking at in their investment universe using their proprietary database of European stocks. They've been working together for well over a decade now and they joined Artemis together in 2011. Their approach is relatively straightforward in terms of what they're looking for, high returns on invested capital. But in our opinion, they've executed it, they've executed it consistently since joining Artemis.

Black: Super. Well, thank you so much for your time.

Meakin: Thank you.

Black: And thanks for joining us.


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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Holly Black  is Senior Editor,