New Ratings
Capital Group Investment Company of America – Silver
Mathieu Caquineau
The fund is managed by an eight-person team with decades of experience. They also run the same strategy sold in the United States under the American Funds brand. Each of the managers works independently, but in ways that dovetail with this fund's dual growth and income mandate. The resulting portfolio usually offers a bit more yield than the S&P 500 without sacrificing much quality. It serves up a mix of conservative dividend payers and underappreciated growth stocks that mutes overall volatility, but not performance. The fund has delivered strong peer-relative returns. Its style will lag at times, but thanks to strong management, a sound process, and reasonable fees, we have the confidence that it will serve investors well in the long run.
Legg Mason Brandywine Global Opportunistic Fixed Income – Silver
Carlos Lucar
Veteran fixed income investors Steve Smith and David Hoffman have been at the helm of this fund since its inception. Their philosophy hinges on disregarding the guideposts of issuance-weighted indexes and instead they look to identify high real yields and currencies in countries with strong or improving fundamentals. They have employed the same valuation-conscious approach to global fixed-income investing for over two decades.
The fund focuses on sovereign debt, but the flexibility afforded to the managers may see them bulk up on corporate and securitized sectors opportunistically. In our view, the experienced managers and growing support team, in addition to the long-running disciplined approach here, make this fund a compelling long-term choice for investors who can endure short-term volatility.
Downgrades
Aberdeen New Dawn (ABD) – Bronze
Edinburgh Dragon (EFM) – Bronze
Mark Laidlaw
Our conviction in the Aberdeen Asia Pacific team has wavered, whilst peer competition has been getting stronger, resulting in an overall drop in our conviction levels. Both the Asian equities and the Japan equities teams have seen some turnover within the ranks over the last few years. That said, Flavia Cheong still leads a quality outfit, which is well resourced and flat structured, with many of the team having spent their whole investment career at the firm. Nonetheless, we feel they are no longer seen as one of the elite groups in this space. The investment process is tried and tested – quality and valuation the major keys. Aberdeen is a patient investor who is willing to back quality businesses that are well managed.
A potential criticism is that the team hasn’t always been critical enough when looking at the continued merits of some long-term holdings where the investment thesis has started to deteriorate. We are encouraged by the measures put in place by the team to help potentially alleviate this issue. Significant outflows, which are down from peak levels, has lessened previous capacity concerns. Whilst we retain conviction in the funds, we do feel there are more compelling choices available.
