Jonathan Miller: Welcome to the Morningstar manager check-up, for the latest fund ratings from our analyst team. We start with the M&G Global High Yield Bond fund, which has been run by Stefan Isaacs since 2010 with James Tomlins serving as co-manager. We believe the duo complement each other, as Tomlins skill is on the bottom-up stock selection and Isaacs focuses on the top-down parts, including duration.
Given the benchmark unconstrained approach, the deep analyst resource is of benefit. Plus, specialists can be called on to assess the broad range of high yield credits. At a sector level, there’s been a preference for defensive sectors, although financials have been an overweight for the last few years. Given the strength of the team, implementation of the process and our faith in continued outperformance of the category, we maintain our Analyst Rating of Bronze
Next, we have the Schroder European fund that’s managed by Martin Skanberg. We’ve reaffirmed the Silver Rating, seeing it as a compelling option for core Europe ex UK exposure. Skanberg takes a measured and balanced approach to constructing the portfolio, keeping a close eye on its positioning relative to the index. He’s style-agnostic, assessing each opportunity in terms of a potential inflection point. This can include a company's growth, margins, or market valuation.
Over the past 12 to 18 months we’ve seen selective additions to value stocks where Skanberg’s started to see opportunities. Given the fund’s core nature, we like this move, as the portfolio’s been showing more of a growth bias than the index and its peers. When it comes to the performance pattern, it’s in line with our expectations and the long term risk adjusted returns rank highly in the category.
Finally, the Blackrock Frontiers (BRFI) investment trust. We have a high opinion of Sam Vecht's knowledge of frontier markets and his ability to consistently apply his process to the trust. This process is a combination of top-down views and bottom-up stock selection. Vecht decides on the country allocation, linked to a number of macro and political factors. Then, meeting companies is important and the team travel to see management before investing. They also look to meet suppliers and customers, to build a complete picture of the dynamics surrounding a business.
The biggest overweights at a country level are Romania, Bangladesh and Ukraine. Risks are heightened due to the low liquidity in these small emerging markets. But we like the investment trust structure, where the manager doesn’t have to worry about flows and can stay invested as he sees fit. We have a positive view on this trust and it keeps its Analyst Rating of Bronze.
