Jonathan Miller: Welcome to the Morningstar Manager Check-up, where you’ll have three fund updates from our research team.
Edward Robertson has been in charge of the Somerset Global Emerging Markets fund since its launch in 2008 and has nearly 20 years’ experience in this space. He follows Somerset’s investment philosophy, which emphasises valuation and balance sheet strength. This typically leads to an opportunity set of quality companies, meaning the portfolio’s valuation is generally higher relative to the index and peer group.
Given the quality bias, the strategy is expected to outperform in weaker markets and participate in stronger markets. Conversely, we expect it to underperform in cyclical rallies or during periods where momentum is a key driver. This was the case last year where not owning expensive tech names led to performance being 2.9% behind the index.
We like the close-knit nature of the team that has worked together for a number of years, and also the fact that the firm has an employee-owned structure, which should foster stability. This, along with the consistent and sensible approach, means the fund holds a Morningstar Analyst Rating of Bronze.
The Franklin India fund benefits from a seasoned portfolio manager in Sukumar Rajah, who heads the locally-based team. He’s spent his whole career covering Indian equities and stock picking is based on ideas from the 17-strong analyst line-up. It’s worth noting that there’s been turnover in the analyst ranks but senior team members provide a valued element of stability. The investment process is primarily bottom-up. It relies upon in-depth company research, with a focus on identifying high-quality companies that can achieve sustainable growth over time.
There is also scope to hold out-of-favour names where there is belief in the longer term outlook despite shorter-term challenges. The result is a relatively high-conviction portfolio with fairly low turnover, reflecting the manager's longer-term approach. With a solid track record, the manager's extensive industry knowledge and the well-resourced support team, we maintain the fund's Morningstar Analyst Rating of Silver.
The Kames Investment Grade Bond fund has been run by Euan McNeil since September 2009 with Stephen Snowden joining him as co-manager in 2011. They’re then supported by a 10-strong investment-grade credit team, plus they access a wider investment group who formulate top-down views and share ideas across major bond markets. This is of value as the fund can invest up to 20% in high-yield and government bonds.
The management duo are active in determining the fund's interest-rate and credit exposure, while asset allocation across markets is driven by a combination of both top-down and bottom-up analysis. But ultimately, it’s duration and credit selection that are the key drivers of this strategy. Under the duo’s tenure performance has broadly been more consistent than peers, accompanied by below-average volatility. We’ve reaffirmed our Morningstar Analyst Rating of Silver, thanks to the experienced managers and the support from an established team and process.
