Jonathan Miller: Welcome to the Morningstar Manager Check-up for three fund updates from our research team.
Nick Little has managed the BlackRock UK fund since September 2011. His approach is flexible, marrying top-down elements and bottom-up stock selection. He looks to identify industry trends and avoid companies that are negatively affected by structural shifts. The majority of the fund is invested in stocks that are leading industry change or have well-established competitive advantages and high cash-generation.
These features result in a growth bias, but there’s some scope to invest part of the fund in value and recovery situations, which give some balance. There’s a long-standing overweight to consumer cyclicals and defensives, while stock selection has driven long term returns. We see positives in the manager, his approach, and his resources, so the fund retains a Morningstar Analyst Rating of Bronze.
Next, the Baillie Gifford Japan investment trust, which saw its long-standing manager retire last year, resulting in Matthew Brett being appointed as lead manager. He’d already been involved in the trust for a decade, plus with a strongly collegial approach and sizeable team, we continue to be optimistic. The focus is on identifying underappreciated long-term growth.
The top down also comes into play given the team looks at industry developments, competitor analysis, demographics, and technology. Stocks are then classified in four distinct buckets: Secular growth, which is the largest, then cyclical growth, special situations and growth stalwarts.
The portfolio is multi cap, with low turnover and despite the change that’s taken place at the manager level, we feel this is an above-average offering, meaning we’ve reaffirmed the Morningstar Analyst Rating of Bronze.
Schroder ISF China Opportunities has been managed by Louisa Lo since 2013, who’s got 25 years of investment experience and is an expert in Chinese equities. She uses a disciplined stock selection process that focuses on growth and valuation, which has proved successful across a number of Asian equity strategies at Schroders.
Lo favours companies that can generate higher returns on investment capital than their weighted average cost of capital. Analysts then carry out in-depth analysis as part of valuing companies. Last year, Lo had rotated out of high-growth names in favour of more defensive investments given concerns overstretched valuations.
This proved timely and overall, we continue to have strong conviction in Lo and the time-tested investment process, so the fund holds a Morningstar Analyst Rating of Silver.
