Looking for a contrarian addition to your portfolio? Want to break from the investment herd?
Morningstar fund analysts award a Gold, Silver or Bronze rating to funds which they think will outperform their sector peers over the medium to long term. A Gold rating denotes that the analyst has the highest conviction in the fund, followed by Silver and then Bronze.
A fund’s star rating indicates how it has performed in recent history compared to the peer group average. If a fund has a five-star rating it has significantly outperformed its peers, if it has a one-star rating it has significantly underperformed.
If a top-rated fund has a one or two-star performance rating, this could be a good opportunity for long-term contrarian investors. These three funds have hold a Gold, Silver or Bronze Analyst Rating, but a performance rating of just one or two stars.
Man GLG Japan CoreAlpha Equity
According to Morningstar fund analyst Pete Brunt this fund remains a highest-conviction pics in the Japan Large-Cap Equity Morningstar Category thanks to its stable, experienced team and highly consistent process.
Stephen Harker is the lead manager and is backed by two senior portfolio managers in Neil Edwards, with whom he has managed the U.K.-domiciled version of this fund since January 2006; and Jeffrey Atherton, who joined in 2011.
All three have over 20 years of investment experience, the vast majority of it in Japanese equities. In June 2014, Adrian Edwards was hired to support the team. He is less experienced but had previously worked with Atherton. He is now fully involved with all elements of the process, which is well entrenched and based on a contrarian investment philosophy. The managers use a rigorous, repeatable process that draws on their extensive knowledge of the Japanese market.
Focusing on the largest 300 listed companies in Japan, they look for those that appear to be undervalued when compared with rivals. They favour quality companies with strong management that are dominant in their sectors, but valuation tends to be the overriding factor.
With the clear focus on value, long-term investment horizon and benchmark-agnostic approach, the portfolio can often exhibit sizable deviations from its peers and the Topix index. As a result, investors should be prepared for performance that can vary intermittently.
BlackRock Fixed Income Global Opportunities
Fund analyst Ashis Dash says this fund’s disciplined and risk-focused process, executed by an experienced and deep team, earns it a Morningstar Analyst Rating of Bronze. The fund spreads risk across sectors, regions, and issuers and emphasises taking many small bets rather than fewer large ones.
The four-person management team led by Rick Rieder has used the fund’s flexibility to its advantage, as reflected in its longer track record in the US, across a variety of market environments, including both weak and strong credit markets as well as periods of rising and falling interest rates.
The fund has no benchmark, and its investable universe is wide, though the managers play it safe. The managers implement macro themes and determine broad asset allocations while relying mostly on the firm’s sector teams for individual security selection.
They use derivatives to hedge risks and take outright positions. The managers aim to generate returns uncorrelated with the broad bond market while producing strong absolute and risk-adjusted performance.
Troy Income & Growth (TIGT)
Troy Income & Growth benefits from a seasoned manager who has consistently applied a well-defined, conservative low-turnover approach, says Brunt.
Francis Brooke joined Troy Asset Management in 2004 charged with building its UK equity-income product. Following his considerable success on the Troy Trojan Income OEIC, the board of this trust appointed him its manager in August 2009.
Troy has a culture based on capital preservation, steady long-term capital and income growth, and strong risk-adjusted returns. Brooke has adhered to these principles throughout his lengthy career and has continued to do so here.
He has been consistent in his approach through market conditions both favourable and unfavourable to his style. The analyst team like that his interests are well aligned with clients' through his investment in the fund and partnership in the group.
