Jonathan Miller: Welcome to this week’s Morningstar manager check-up, for 3 fund updates from our research team.
M&G Global Dividend has been run by Stuart Rhodes since launch in 2008. The fund employs a bottom-up stock-picking approach, driven by fundamental analysis. Rhodes selects companies with different drivers of dividend growth to construct a balanced portfolio. He does this by allocating stocks into three buckets: quality, assets, and rapid growth. What he looks for, is companies with capital discipline and dividend growth potential. But valuation is just as important as Rhodes doesn’t want to overpay for growth.
What you get here is a fund with exposure to cyclicals, mid-caps and varying emerging markets, which helps distinguish it from peers. This tends to mean volatility and drawdown that’s higher than peers, but overall, we believe investors can continue to be well compensated. The fund therefore maintains its Morningstar Analyst Rating of Silver.
Mike Fox has managed the Royal London Sustainable Leaders fund since November 2003. Given the mandate, there’s limited exposure to sectors such as energy and basic materials, meaning returns can at times deviate from the market and peers. Fox looks to identify businesses where he believes the longer-term growth prospects are underappreciated by the market, and the fund exhibits a growth bias relative to the index and peers.
Notable over-weights in the portfolio are healthcare and technology, where he’s been using his overseas allowance to hold the likes of Amazon, Microsoft and Alphabet. We believe the process is disciplined and has been well executed over Fox’s tenure, so the fund retains its Morningstar Analyst Rating of Bronze.
The BNY Mellon Long Term Global Equity fund is managed by Walter Scott & Partners, which is a boutique within the BNY Mellon stable. The process is actually relatively simple. And that’s to screen for companies that can generate at least 20% cash flow return on investment over the cycle. But it’s the depth and rigour of the firm's bottom-up fundamental research that stand out from a 41-member team, coupled with a high-conviction, long-term view in holdings.
The focus on quality makes the fund prone to lag in strong market rallies, such as last year. But over the long term the fund has been a solid performer. We’ve seen a consistent process throughout different market cycles and have confidence the approach can continue to outperform over a market cycle. The fund therefore merits its Morningstar Analyst Rating of Silver.
