Jonathan Miller: Welcome to the Morningstar Manager Check-Up for three fund updates from our research team.
We start with Loomis Sayles US Equity Leaders, which is managed by Aziz Hamzaogullari who’s been using the same process with largely the same team since 2006. He adopts a long-term approach through a proprietary bottom-up research framework. This is focused on investing in high-quality businesses with sustainable competitive advantages and profitable growth, when they trade at a significant discount to intrinsic value. The high-conviction and concentrated portfolio of 30-40 stocks results in positioning that can differ significantly from the benchmark. This sees technology and consumer stocks featuring heavily. All told, the manager’s long-term, disciplined approach has been consistently applied over years and has provided investors with a favourable risk/return profile. We’ve therefore reaffirmed the fund’s Morningstar Analyst Rating of Silver.
Next, the BNY Mellon Long Term Global Equity fund which is managed by Walter Scott & Partners, a boutique within the BNY Mellon stable. The process starts with a screen for companies that can generate at least 20% cash flow return on investment over the cycle. From there a 40 to 60 stock portfolio is built. The depth and rigour of the firm's bottom-up fundamental research is high, with a stable and long tenured team involved. The focus on balance sheet strength has also ensured an element of defensiveness in choppy markets. 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.
Finally, Lazard Emerging Markets which has been run by James Donald since 2007. His approach seeks firms with above-average returns on equity, trading at compelling valuations. This involves being bold, going into out of favour areas and being patient. Although decisions are made on a company, not macroeconomic, basis, the strategy often has country weightings that deviate markedly from its benchmark. Sticking to his process has meant avoiding internet stocks deemed too expensive, which has held back returns of late. In 2016 however, when the value style had a comeback, this was among the top performers in the sector. The knowledgeable and experienced management and sound approach give it a good chance of outperforming in the future. As a result, the fund retains its Morningstar Analyst Rating of Silver.
