Morningstar Manager Check-Up

VIDEO: Morningstar analyst Samuel Meakin looks at three rated funds which have outperformed in 2020

Holly Black 9 December, 2020 | 11:36AM
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Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Sam Meakin. He is from the Morningstar Manager Research team. Hello.

Samuel Meakin: Hi, Holly.

Black: So, it's that time of year when we start looking at funds that have done well or not so well and thinking about the year ahead. So, you're looking at funds that are rated by the team. Where would you like to start?

Meakin: Yeah. So, obviously, it's been a difficult time for the equity income sector this year as the pandemic has meant that many companies have cut their dividends. So, I thought I'd touch on a couple of UK equity income funds where we have conviction that they can deliver for investors longer term.

The first one is Franklin UK Equity Income. It's managed by Colin Morton. He is at the reins here for a very long time since 1995, in fact, when the strategy was back in its Rensburg guys. So, that's brought a lot of consistency of management and consistency of approach for investors over the long term. Performance speaks strong over the longer term relative to the FTSE All-Share Index and also versus equity income peers. Also, the low fees help here, reducing the drag on net returns that investors actually receive.

Black: So, obviously, it's done well over the long term, but it must be difficult for a manager, even with so much experience when something like 2020 and Covid happens, there really is no hiding place.

Meakin: Yeah, that's right. And what we're looking for really is that managers that stick to their guns really, stick to what's brought them that success in the past, stay true to their process.

Black: Okay. What is fund number two?

Meakin: The second income fund is Royal London UK Equity Income. Now, this fund is a little bit different. You still find some of those well-known large cap companies in the portfolio, but there's also more of a focus on mid cap names as well, which clearly at times can exhibit more volatility than the large cap end of the market, but they also offer the opportunity for growth, and that's why the fund manager here, Martin Cholwill, that's why he has led there in his efforts to find those companies that can deliver sustainable dividend growth. He has managed the fund since 2005, again, so providing that stability for investors over time. And the fund also benefits from that experience and market judgment that he has gained over the years to effectively implement what he is doing here.

Black: And you've got something a little bit racier for our last fund today, haven't you?

Meakin: Yeah, that's right. For the final pick, I thought I'd go for something a bit different, an area that's done really well in the market environment we've seen this year. So, some of the viewers may have already guessed that area and it's technology, and the fund I've chosen here is Polar Capital Global Technology. It's a growth-orientated approach. So, they're identifying key themes and looking to benefit from significant technological developments. But also, with that, there's an awareness of the wider market environment. And this approach has really stood them in good stead, not just this year where they've comfortably outperformed, but also over the longer term as well as, again, the fund has really comfortably outperformed over the 5 and 10-year periods.

Black: There's something I wonder in a year when it seems like all tech stocks are flying. How do these managers show their skills when it seems like you could just pick anything in that sector?

Meakin: Yeah, well – so, yeah, we are comparing them against the technology benchmark to measure the stock picking effect within that, because as you say, there's a wide plethora of technology stocks that have done really well this year. So, that's one way. And also, here, it's a growth approach, but they're aware of the valuation side as well to a degree. So, in specific sub-sectors of the technology market where things have raced away, they've looked to sort of trim back on those areas just to fend off against any potential turn there.

Black: Yeah. Sam, thank you so much for your time. For Morningstar, I'm Holly Black.

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,


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