Jonathan Miller: Welcome to the final Morningstar Manager Check-up of the year, with three fund updates from our analyst team.
The JOHCM UK Dynamic fund was launched ten years ago by Alex Savvides and he’s been manager throughout this period. The process is based around the identification of companies undergoing change not yet fully recognised by the market.
Savvides looks to find areas of the market and specific stocks that have been underperforming and therefore offer reasonable value. But this must be coupled with his evidence that company management teams are implementing changes that will lead to improving returns over time. Stock weightings are decided relative to the benchmark, and there’s limits depending on the company’s size.
What you tend to see is 40-50 holdings, and the focus on self-help opportunities leads the fund to have a value tilt. Savvides has impressed through the disciplined application of the strategy and the strength of his fundamental analysis. We therefore reaffirm the fund’s Morningstar Analyst Rating of Silver.
The JPM Global Corporate Bond fund has been run by Lisa Coleman since launch in March 2009. There’s then three other managers involved; one alongside her in New York to run the US portion of the fund, while the other two running the European sleeve are based in London. The process exploits the full extent of resources available to the team. This involves the macro strategy group, all the way through to the 20 analysts dedicated to investment-grade credit research.
Once the top-down views are set, it’s the analysts’ output that help reflect the positioning. The fund’s approach tends to lag when high yield rallies, given the lower exposure here compared with peers. Despite some of the comanagers' short tenures at the fund, Coleman's leadership and significant experience in credit markets, combined with the disciplined investment process, underpin the Morningstar Analyst Rating of Bronze.
Finally, there’s plenty to like with the Comgest Growth Emerging Markets fund. It benefits from an experienced and stable investment team, combined with a time-tested process that’s clearly orientated towards quality growth companies.
Looking for companies with one or more sustainable competitive advantages leads the portfolio to preferred sectors such as technology or consumer defensive. On the flip side, stocks belonging to the most-cyclical sectors--banks, energy, and commodities--are generally excluded. At the same time the team is also valuation-conscious. We saw this in the second half of 2017, when exposure to Chinese stocks was reduced for valuation reasons, with attention turning towards less-expensive domestic-focused companies, found in weaker economies such as Brazil and South Africa.
This strategy has worked very well in the long run thanks to patience, discipline, and great teamwork. We’ve also seen an unwavering commitment to the investment approach, all of which reinforce the Morningstar Analyst Rating of Gold.
That’s it for this year. Festive greetings and Merry Christmas.
