Jonathan Miller: I’m Jonathan Miller and welcome to the Morningstar Manager Check Up on three funds we recently reviewed.
Absolute Insight Equity Market Neutral is managed by a seven-member team that averages 21 years of investment experience. Each person is responsible for a number of pair trades through detailed bottom-up analysis. The emphasis is on developing positive and negative stock ideas, identifying the market risks and hedging positions appropriately to ensure a relatively market-neutral outcome. Ultimately this means looking to eke out returns, whether markets are heading up or down.
The fund has been successfully steered during challenging periods for equity markets such as in 2008, and again in 2011. So capital preservation is key, although given the approach we would expect a limited upside compared with more-leveraged funds in the space. That said we believe this remains a worthy proposition for investors seeking modest positive returns and strong downside resilience, meaning the fund holds a Morningstar Analyst Rating of Bronze.
The Capital Group New Perspective fund was launched here a couple of years ago, but its mirror version for US investors dates back to 1973.The strategy is built on investing in blue chip firms poised to benefit from changing global trade patterns. For example we’ve seen the tech allocation over the last five years more than doubling to the near-25% we see today. Direct investments in emerging markets are also made where there’s an 11% holding.
Looking for mispriced or misunderstood companies also forms part of the rationale. Here we can point to a key position in Samsung which was built in the midst of its Galaxy Notes catching fire. With seven underlying managers each running a sleeve, these are brought together to create the final portfolio. This combination mutes volatility for the fund as a whole and helps it to fare well in different market conditions. There’s a lot of positives, and we see it as a top-notch strategy, meaning it holds our top Morningstar Analyst Rating of Gold.
Morant Wright Japan benefits from a very experienced management team applying a consistent and disciplined investment approach. The firm is a dedicated Japanese equity boutique and there’s six fund managers at the helm on this fund. They believe that investing in undervalued companies through a disciplined, research-based approach is key to generating strong long-term returns.
As a result they’re strongly valuation conscious and what we’ve found is mid cap exposure around the 60 to 65% mark, with the balance primarily in large caps. This and the style bias means comparison against the wider Topix index is less meaningful than more mainstream Japanese equity funds. There will be performance variability given the approach, but we have conviction in the team and the fund retains its Morningstar Analyst Rating of Bronze.
