Peter Brunt: Hi there and welcome to our weekly Morningstar Manager Check-up, where we look at some of the funds under our coverage in which we have retained our conviction.
First up is Schroder European, which offers investors broad exposure to Europe ex UK equities. It is managed by Martin Skanberg, who has been at the helm since 2006, providing a good level of continuity. He manages the fund primarily from the bottom up, fully leveraging the group's considerable Pan-European analytical resources for stock research. While it experienced a slightly higher level of turnover in 2017, including the loss of some experienced members, the team has otherwise been stable and remains structured in a way that we believe instils drive and motivation.
Skanberg takes a measured approach to constructing the portfolio, keeping a close eye on its positioning relative to the FTSE World Europe ex UK benchmark. While he is style-agnostic, he has successfully tilted the portfolio to reflect the areas where he sees the most opportunities over the years. This, together with consistently strong stock selection, has seen investors richly rewarded under Skanberg’s watch. The fund retains a Morningstar Analyst Rating of Silver.
Next, we have one of our highest conviction funds in the Japanese Large-Cap Equity space, Man GLG Japan CoreAlpha. The fund is managed by an experienced team, headed by Stephen Harker and including senior portfolio managers Neil Edwards and Jeffrey Atherton. All three have over 20 years of investment experience, the vast majority of it in Japanese equities. The managers use a rigorous, repeatable process that draws on this experience. Focusing on the largest 300 listed companies in Japan, they look for those that appear to be undervalued when compared with rivals.
They favour quality companies with strong management that are dominant in their sectors, but valuation tends to be the overriding factor. With the clear focus on value, long-term investment horizon and unconstrained approach, the portfolio can often exhibit sizable deviations from its peers and the Topix benchmark. As a result, investors should be prepared for returns that can vary intermittently, but over the long term we continue to believe in the fund’s ability to outperform. The combination of experienced management with a well-established process sees us maintain our Morningstar Analyst Rating of Gold.
Lastly, we look closer to home with Threadneedle UK, which offers equity exposure to our domestic market. Chris Kinder took over this portfolio in September 2014 following the departure of former manager Simon Brazier. Kinder joined Threadneedle in 2010, since when he successfully managed a long/short UK equity portfolio. He takes the same approach to investment here, this time only looking at long ideas, where he is focused on stocks with good longer-term growth, but that have fallen out of favour in the short term.
Overall, the portfolio is managed in a risk-aware fashion, with mild growth and mid-cap biases versus peers and the benchmark. Kinder’s supporting team has seen some personnel turnover in recent years, including the retirement of Leigh Harrison in 2016; he was head of equities and led the UK equities team from 2014. While we would welcome an extended period of greater stability, we feel the team remains well-resourced and includes a number of managers with significant levels of experience. The fund therefore continues to merit a Morningstar Analyst Rating of Bronze.
