Jonthan Miller: Welcome to the latest updates from our fund research team in this Morningstar manager check-up.
Jenny Jones has been in charge of the Schroder US Smaller Companies strategy since December 2004. She brings over three decades of experience investing in the space. Earlier this year, Robert Kaynor was appointed co-manager, as part of long-term succession planning. He was hired in 2013 as the eventual successor to Jones, and promoting him to co-manager is another step in this process.
The process remains unchanged, blending a unique combination of stock types: mispriced growth, steady-Eddies, and turnarounds. There’s a structural defensiveness in the approach, so the portfolio typically lags in strongly rising markets, while it provides resilience in falling markets. Overall, it’s unlikely there will be a wholesale change here and the fund’s long-term track record remains strong. We also draw comfort from Jones still being actively involved with the strategy. The fund therefore maintains its Morningstar Analyst Rating of Silver.
Vanguard’s Lifestrategy range consists of five funds. The exposure to equities and bonds never changes and the equity increments go up by 20% in each fund, all the way through to 100% in equities. Here we show the 60% equity fund, which is the largest, with £4.5 billion of assets. Following in-depth research by Vanguard into the diversification benefits from investing across equities and bonds, an asset allocation has been created. On the fixed income side there’s a bias towards government bonds.
The rationale is that government bonds have generally provided more effective diversification of equity risk than lower-grade bonds, which often have significant correlation with equities. The portfolio is then populated with Vanguard’s own set of index funds. This helps keep costs down and the overall fees to buy a Lifestrategy fund come in very low, at just 0.22%. That provides an ongoing edge versus other funds in the category, helping them remain a sound long-term option for investors. The straightforward, no-frills approach ensures that the fund retains its Morningstar Analyst Rating of Gold.
The Aberdeen Latin America fund has a team approach that’s led by seasoned investor Devan Kaloo, who heads the global emerging markets team, based in London and Sao Paulo. The approach is collegiate but with the Aberdeen and Standard Life Investments merger, the team structure is changing. We believe this will foster better accountability and an improvement in sector expertise.
While the team will retain Aberdeen’s long-term quality process, it will also take on an element that looks out for underappreciated companies and industry-level change. We believe it could potentially result in better timing in market entry and exit among stock positions. Although there is some uncertainty with the changes here, we retain conviction given the core of the approach, the depth of resources, and strong track record. The fund therefore retains its Morningstar Analyst Rating of Bronze.
