Jonathan Miller: Welcome to the Morningstar Manager Check-up for the latest updates from our fund research team.
BlackRock’s BGF Emerging Europe fund has been managed by Sam Vecht since 2009. The process is a combination of top-down and bottom-up. It starts with input from the team’s economists, which Vecht uses to decide the portfolio’s country allocation. Then when the country weights have been finalised, the team looks to identify stocks with growth opportunities. What they’re seeking, are companies that can translate top-line revenue growth into free-cash-flow.
Vecht is then sensitive to valuations and looks to avoid market consensus, so there’s a sense of being contrarian when it comes to portfolio construction. We’ve noted changes in the team of late, but we feel that much of the outperformance is derived from Vecht’s strength in tactically shifting the portfolio. So we’ve still got confidence in him and the risk-aware approach he instils in the team, meaning the fund maintains its Morningstar Analyst Rating of Bronze.
Paul Wild became lead manager of the JOHCM [Continental] European fund in April 2010, but his association with the fund dates back to 2003, when he was hired as a comanager. He uses a strategy that starts by taking macro views. This informs the portfolio’s sector weightings, and Wild then hunts for stocks across the continent that fit these views. He looks to identify stocks with the most compelling earnings growth and positive earnings momentum.
There’s an awareness of the benchmark at the sector level and this has helped avoid significant drawdowns versus the index. His current thinking here is shown by an underweight in consumer staples and overweight to financials. By having an experienced manager with a sound and tested process, we believe this is an appealing fund, and it holds a Morningstar Analyst Rating of Silver.
Loomis Sayles US Equity Leaders is managed by Aziz Hamzaogullari, who since 2006, has been using the same process, surrounded largely by the same team. Of the six analysts working with him, three have been there for 10 years. Through the proprietary bottom-up framework, he looks to invest in high-quality businesses, with sustainable competitive advantages and profitable growth, when they trade at a significant discount to intrinsic value. With a concentrated portfolio of 30-40 stocks, sector and stock positioning can differ significantly from the index.
However, this hasn’t historically meant higher volatility compared with peers. What we see is sufficient diversification by compiling a portfolio of companies with different business drivers. All told, the manager’s long-term, disciplined approach has been consistently applied over the years, resulting in a favourable risk/return profile. The fund therefore earns a Morningstar Analyst Rating of Silver.
