Nominees for Global Equity Manager of the Year

Nominees revealed for our inaugural Pan-Europe Global Equity Manager of the Year Award.

Christopher J. Traulsen, CFA 12 February, 2010 | 1:00PM
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On Tuesday, we announced the coming launch of our inaugural Morningstar Pan-Europe Manager of the Year awards. You can read more about the principles behind the awards and the selection process here. They are based on the forward looking insights of our team of more than 25 qualitative fund analysts in Europe an

d Asia, and seek to recognise those funds that fared well in 2009, but that also have proven themselves to be excellent stewards of shareholders’ capital through time.

There are two awards: Morningstar Pan-Europe European Equity Manager of the Year and Morningstar Pan-Europe Global Equity Manager of the Year.

The nominees for the Morningstar Pan-Europe Global Equity Manager of the Year are as follows (you can see the Morningstar Pan-Europe European Equity Manager of the Year nominees here):

Edouard Carmignac
Carmignac Investissement
Edouard Carmignac is one of the most experienced and, in our view, most talented fund managers in Europe. He founded his asset management boutique 20 years ago, and has since then been building a compact, yet very skilled team of managers and analysts. All contribute to the successful stock ideas and top-down themes that epitomise his opportunistic management style. Our analysts hold the shop itself in high regard; although we feel fees could be somewhat lower, we think the culture of the group is geared towards investors’ interests, as evidenced by the company’s policy of disclosing full portfolio holdings quarterly on its website, a practice unfortunately rare enough in Europe to be highlighted.

Edouard Carmignac’s track record speaks for itself. The fund he is nominated for, Carmignac Investissement, ranks in the first percentile of the Morningstar Global Large-Cap Growth equity category over three, five and ten years at end of January of 2010. Importantly, Carmignac was one of the very few to outperform both in 2008 and 2009 thanks among other factors to a brave move into US banks in early March 2009, after protecting investors’ capital better than most competitors in 2008.

Graham French
M&G Global Basics
Graham French embodies many of the qualities we like to see in a fund manager. He has been with M&G for over 20 years and he heads a strong and stable team. He is also a patient investor and his process is time-tested. In the Global Basics fund, he seeks truly long-term opportunities in the building blocks of the global economy. This makes the fund a higher risk proposition as his themes can be out of favour at times, but French has the patience to ride out short-term underperformance secure in his assessment of a stock’s ultimate potential.

French’s patience can be seen in his turnover in 2009 – at less than 5% it showcases his long-term approach and unwillingness to chase momentum in markets. In 2009 the fund finished in the 20th percentile of its Morningstar Global Small/Mid-Cap Equity category with a return of 35.31%, some 10 percentage points ahead of the category average. The risks in the fund were on display in 2008, when it lost over 26% of investors’ money, but even then it placed in the 55% percentile, as many other funds lost far more. What makes French’s performance in 2009 more impressive is that his mandate excludes financials so he wasn’t just riding the sector’s rebound. French is a truly skilled manager who is clearly passionate about delivering excellent long-term returns to his investors. The fact he invests substantially in his fund aligns his interests well.

Rolf Stout
BNP Paribas OBAM
Rolf Stout and his team have invested with strong conviction for more than 20 years now at the helm of BNP Paribas (formerly Fortis) OBAM fund. Stout divides the portfolio in two parts: one part he invests in companies he expects to deliver long-term outperformance and another more pragmatic portion he uses to invest in shorter-term themes. Two examples of current themes are “fallen financials” and “Indonesia”. Stout is never one to shy away from backing his best ideas and the portfolio has oft featured large stakes in just a few sectors. The investment horizon is long and turnover in the portfolio is very low, which should help give the fund a structural edge over time by limiting trading costs. The fund has also has a low TER of 1.11%.

Despite all those factors in its favour, this is not a fund that will suit everyone. Its risks run high as Stout is willing to stick with outsized bets even when through the toughest times. In 2008, for example, the fund plunged 66%(EUR) / 55%(GBP) as its energy and materials bets fell sharply. However, for those with patience, the rewards here have been worth waiting for. The fund returned 70.1% (EUR)/56.3% (GBP) in 2009, leaving 99% of its peers behind. Positions in financials, commodity stocks and emerging markets contributed to this performance. And the fund’s long-term record is stellar—at the end of 2009, the fund ranked in the top quintile of its category over 5 years, in the 26th percentile over 10 years, and in the top 4 per cent over the past 15 years. The fund did recently change hands, moving to BNP Paribas after that firm acquired Fortis, but we do not expect the purchase to adversely affect this fund or Stout.

Filip Weintraub and Torkell Eide
Veteran investor Filip Weintraub and his colleagues at Skagen, based out of the oil town of Stavanger Norway, are among the best global investors we’ve come across (Omid Gholamifar has decided to leave the team effective February 11th; we don’t believe it will fundamentally change the overall justification for investing in the fund.). A contrarian investor, Weintraub is not afraid to go against popular opinion—indeed his stock-in-trade is to ferret out the undervalued and unloved before others. That’s not to say the fund is deep-value, however. Indeed, the team wants cash generative companies with strong business models, not just turnaround plays. They also tend to hold companies for the long-haul. This has the salutary effect of keeping turnover low and trading costs in check, a trait we greatly admire, but it often gives the fund more of a blend than a value cast. Nevertheless, the fund has a decidedly different flavour from its Morningstar Global Large-Cap Blend Equity peers. Although it is primarily large-cap, for example, the managers will dip down the cap-ladder for the right opportunity. Most notably, they also venture into emerging-markets issues to a significant extent, keeping about 25% of the portfolio there in recent years. In all, about half the portfolio consists of off-benchmark positions—a mark of truly active management.

The fund excelled in 2009, delivering a 48.9% (EUR)/36.8% (GBP) return, putting it 18.5 percentage points (EUR)/17 percentage points (GBP) ahead of its MSCI AC World benchmark and placing in the top five per cent of its Morningstar peer group. The exposure to emerging-markets and issues further down the market-cap scale helped, as did strong stock selection in energy and industrials issues. The team’s style comes with risk—that was evident in 2008 when a the fund’s emerging-markets stake sent it to a 44.4% (EUR)/26.9% (GBP) loss, relegating it to the category’s bottom quartile. However, the team has shown an uncanny ability to use that risk to extremely good effect through time. Indeed, except for 2008, the fund has finished every calendar year in the past decade in the category’s top five per-cent, a truly remarkable feat. The fund ranks in its category’s top one per cent over the past 5 and 10 years ended 31 January, delivering an annualised return of 9.1% (EUR)/ 14.1% (GBP) in the 5-year period and 8.2% (EUR)/12.18% (GBP) in the ten-year period. In contrast, its average peer managed only an annualised loss of 3.73% (EUR)/0.17% GBP in the past decade.

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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About Author

Christopher J. Traulsen, CFA  is director of fund research, Europe and Asia, Morningstar.