Emma Wall: Hello and welcome to Morningstar. I am Emma Wall and here with me today to give his 3 Fund Picks is Simon Evan-Cook, Manager of the Premier Multi-Asset Growth and Income Fund.
Hello there.
Simon Evan-Cook: Hi there.
Wall: So what’s the first fund we are highlighting today?
Evan-Cook: Well the three funds I have got today I am going to give a bullish fund kind of I don’t know fund and then maybe more of a bearish fund. I’ll start with the bullish fund and that’s HMG Global Emerging Markets.
Now, obviously, if you are bearish about emerging markets at the moment, you probably just want to avoid the region entirely but the reason why we like this fund is it has got a niche approach. That niche is that it invests in the subsidiaries of developed market companies.
Now why that’s interesting is particularly at the moment you are getting emerging market valuations, but you are quite often getting developed market levels of corporate governance and support and knowledge. So, you are getting – navigating away from just some of the risks of emerging markets – largely corporate governance, and you are getting that growth potential too.
So I think this is one to kind of put away for the long-term and not worry about if the emerging market crisis gets worst from here then this will certainly not be immune. But in terms of a buy-and-hold fund for the next seven to 10 years I think this is going to be an excellent fund to look forward.
Wall: That’s quite a good entry point perhaps for those individuals, like you say, who are feeling risky about emerging markets but would quite like to get exposure to the growth themes that are inarguably part and parcel of that – those parts of the world?
Evan-Cook: Exactly, yeah, and he’s value investors, which sits very comfortably with us because we are value investors and the fund so far is a year old. That year has been pretty terrible even by emerging market standards but the reason for that is because the entire portfolio was started as cheap, whereas a mature portfolio will have some stuff that was cheap that’s now rallying, the entire portfolio has been cheap what we are starting to see now and hope is that some of that value is being recognized and that related performance would die down.
But make no mistake, if you do look at the chart of this, you’re going to need to be brave to buy-in, but we bought in three or four months ago so you are looking at September last year. I mean, it felt brave doing that at the time, still feels brave holding, given what’s going on in emerging markets. But I think some of the best decisions you can make in the fund buying world to feel uncomfortable at the time.
Wall: Indeed, contrarian investing.
Evan-Cook: Yes, exactly.
Wall: And what's the second fund today?
Evan-Cook: So the second one is one we've held for quite a while now, it's the Polar Global Insurance Fund. The reason we bought this fund originally, I think we've held it four or five years now was the valuations of the types of stocks they buy, which are effectively non-life insurance companies and they pick the best companies within that.
I mean, it sounds extraordinarily dull and that's part of the appeal, because there's no bubble in this stuff. It's not like commodities or it's not like tech stocks where people get excited about it. People don't get excited about these types of companies. It's being largely ignored by markets, it's effectively performed with how the business has performed, which is well and it's still available in a reasonable valuation.
And at time when U.S. equities to us generally look quite expensive, but the U.S. dollar looks reasonably appealing, the fact that it's a majority U.S. listed fund, so it does give you that dollar exposure is a further help. You're not buying overly expensive equities, you are buying very well run companies and its track record has been very stable. It's proved to be fairly low beta over time. So, we've got a lot of comfort holding this fund going forward, when a lot of other stuff feels quite frankly, uncomfortable.
Wall: And what's the third and final fund?
Evan-Cook: The third one is Artemis US Absolute Return, this is a relatively new holding for us run by Stephen Jones. This is for us part of a basket of long/short funds that we've recently added into the fund because we think the prospects for long-only equities are relatively limited from here. So there's not an opportunity cost from getting rid of that beta element and buying a long/short fund, we think the returns from here will be pretty similar actually. So we're not giving up a lot from doing that.
Why we like Stephen is, he's very much on top of markets, he's very much someone who is aware of what's outperforming and what's not. But he's also crucially for us, he is a bottom up stock picker, which is where we ourselves get a lot of our alpha. He's looking at individual companies, he's doing the fundamental research to find the companies that you should be holding, but just as importantly finding the companies that you shouldn't be holding.
The difference being, obviously, he can short them in this fund, whereas a long-only equity manager would just avoid them, which is where he gets that market neutrality from. So if you are bearish at this point in the cycle and we certainly are at the very least cautious, this feels like a pretty decent option at the current time.
Wall: Simon, thank you very much.
Evan-Cook: Thank you.
Wall: This is Emma Wall for Morningstar. Thank you for watching.
