As all investors know, past performance is no indicator of future returns. This holds true for assets which have recently rallied as much as it does for those stocks and funds which have not fared so well in the near past.
The Morningstar star-rating for funds is a purely quantitative measure, comparing funds’ performance against their category peers. As a result, this is no indicator of future returns. But the Morningstar Analyst Rating is a qualitative measure, using five pillars – process, people, price, parent and risk-adjusted performance – to determine whether a fund is likely to outperform its category peers.
The funds below are all rated Gold or Silver by Morningstar analysts, meaning that they consider them to the best in class, but they are also two- or three-star rated meaning that the units are cheaper now than in the past. It is up to you, the investor to decide whether you have conviction in these funds’ underlying exposure. But if you are bullish on corporate bonds, global equities or UK stocks these could be the funds for you.
Fidelity MoneyBuilder Income
Morningstar has a high opinion of lead manager Ian Spreadbury and comanager Sajiv Vaid, given their backgrounds and long-term portfolio management experience, says fund analyst Carlos Lucar.
Spreadbury has been at the helm since inception, and his presence underpins our conviction. He has gained valuable perspective through his long tenure at Fidelity, his 10 prior years at L&G, and his earlier actuarial career. Having built the team at Fidelity in the 1990s, he is able to get the most out of the analyst team. He also designed the investment process, which remains in place.
Old Mutual UK Alpha
Old Mutual UK Alpha continues to benefit from the stewardship of a talented UK equity manager, says Morningstar analyst Simon Dorricott.
Richard Buxton took control of this fund in December 2009, originally on an outsourced basis, before joining Old Mutual Global Investors from Schroders in June 2013. He is a seasoned manager with over 30 years of investment experience. In August 2015 he was appointed CEO of OMGI. The role involves additional responsibilities and demands on his time, but he clearly remains engaged with the investment process. He still attends the weekly UK team meetings, regularly meets firms, and continues to sit on the UK equity desk.
That said, there is undoubtedly more reliance on his colleagues Errol Francis and Ed Meier in terms of monitoring newsflow and day-to-day trading, but Morningstar fund analysts take comfort from the fact that they have been influential for a number of years, the three of them have successfully worked together for around 10 years, and further support is provided by the rest of the UK team.
Veritas Global Equity Income
The Veritas fund remains amongst the strongest offerings in its sector, says Morningstar analyst Muna Abu-Habsa.
She considers the major strength of this fund is its management. Charles Richardson and Andrew Headley, who previously worked together at Newton, have been at the helm since the fund’s launch in 2006 and have run the institutional version since 2003. Richardson leads on this fund while Headley leads on Veritas Global Focus. They benefit from the support of an experienced team of six analysts, whose research is instrumental to the portfolio.
The fund's standout characteristic is the extent to which the managers aim to deliver real returns to investors. They invest in companies with durable competitive advantages and strong, sustainable cash flows that can lead to dividend payments.
