This article is part of Morningstar’s Guide to Investment Trusts, highlighting the benefits of these unique investment vehicles – busting the investment trust jargon, revealing potential pitfalls and celebrating those experienced managers who have earned the top ranking from Morningstar fund analysts.
Gold is the highest rating Morningstar analyst can award a fund. These funds are our highest-conviction recommendations and stand out as the best of breed for their investment mandate. By giving a fund a Gold Rating, analysts are expressing an expectation that it will outperform its peer group over the next five years.
To earn this Gold Rating a fund should have a seasoned, talented and successful management team and a sound thoughtful process which is executed well, a reasonable fee and supportive parent company. The Analyst Rating does not express a view on a given asset class but evaluates the fund in the context of its peer group.
Aberdeen New Dawn (ABD)
Sector: Asia Pacific
Aberdeen is known for investing in the highest-quality names and this approach was not rewarded in 2013, when high quality underperformed low quality. The fund was also hurt by its long-standing overweight to India and Southeast Asia, and its underweight to North Asia, especially countries such as China, Korea and Taiwan.
That said, Morningstar’s conviction in the fund's process remains intact. Indeed, the team has been following the same process consistently since its creation by Hugh Young in 1985, giving this fund one of the longest track records under the team's influence.
Jupiter European Opportunities (JEO)
Sector: Europe
From the fund’s launch in 2000, to March 2014 it has returned 13% annualised, some 8 percentage points more than its average Morningstar Europe Flex-Cap Equity Category peer. Not only that, the manager has achieved consistent outperformance in every year bar one, and that one was 2008 when gearing exacerbated the market falls.
Alexander Darwall has been in charge of this fund from the start, and Morningstar fund analysts think this stability at the helm is a contributing factor to the fund’s success thus far, as is the manager’s European equity experience, which extends back to the 1980s.
Temple Bar Investment Trust (TMPL)
Sector: UK Equity Income
Experienced manager Alastair Mundy is backed by a stable and well-resourced team that he has hand-picked over his 14 years at Investec—in that time, just one team member has left and that was for personal reasons rather than to join a competitor.
Mundy’s application of the process over the years has been very successful. Not only has Temple Bar outperformed its Morningstar UK Large-Cap Value Equity Category peers by some considerable margin, Mundy has achieved this without taking excessive risk, despite the structural gearing that's in place through two fixed-term debentures and now a 15-year private placement note, too.
