Holly Black: Welcome to the Morningstar Manager Check-up, I'm Holly Black. With me in the studio is Jon Miller, he's Head of Fund Research for Morningstar. Hi.
Jonathan Miller: Hello Holly.
Black: So you've been focusing on emerging markets funds this month. What's been coming on to your radar?
Miller: Yes, a few funds that we've looked at where we've maintained some ratings and even one we can talk about bit later on, an upgrade. Maybe we'll start with Stewart Investors Global Emerging Market Leaders. So they have a team that’s been in place for quite a while, well versed in what they do although there has been a fund manager added a few years ago called Ashish Swarup who joined from Fidelity. And there what the team are looking for are companies that they invest in where there is management integrity, pricing power, franchise strength. So these are the real bits of DNA they look for in businesses as part of their research process.
Black: And you've maintained a Silver rating on that, so what keeps it at that for you?
Miller: So the consistency of the team even though Ashish was a new addition that’s important, we feel the process is embedded in what they do. That hasn’t shifted since he's joined and also performance has carried on as we’d expect. When I mean performance, it means when the approach works and when it doesn’t. So what they look for in firms actually leans them towards a large consumer staples rating and very little in technology where there is very high aggressive growth. So the fund has underperformed in times when, in emerging markets tech was racing away like it did a couple of years ago. And then bounced back heavily when tech was less in vogue. So we think a lot of things are coming together across the board and that’s enough to sustain a Silver rating.
Black: And what else do we like in the emerging market space?
Miller: So maybe we just go focus on Asia dedicated fund, Schroder Asian Alpha Plus, that’s run by Matthew Dobbs. So he's actually running investment trust in that space that replicates the portfolio pretty much, for about 20 years or so and the funds been in existence for about 12 years. But really he's got a long tenure in the region, but he's backed by about 40 analysts at Schroders that are based out there. And all their fundamental work and stock work they look out is important to how he helps them shape the portfolio.
Black: And what about the performance and cost pillars?
Miller: So performance there has been pretty much outstanding over the long term, price is reasonable and what we call growth at a reasonable price is what he's looking for. So it's the good things in terms of the growth story in Asia that he's trying to harness, buy at the right price. He's underweight China, doesn’t particularly like the real estate and bank sector, prefers some more stable firms in Hong Kong to access the Chinese market. So over the long term he's delivered and a Silver rating is a strong reflection of our views there.
Black: And you said you had an upgrade this month as well?
Miller: So there we move to a dedicated China fund. So Fidelity China Focus and a bit different of the Asia growth story I talked about just before. Actually Fidelity China Focus is managed by Jing Ning and there she's got more of a value bias which you might think doesn’t really happen too much in these sort of markets where growth is the big story. But she's done a very good job having joined from BlackRock about six years ago, it's not necessarily easy having a transition. I don’t think that five and a bit years on has been part of us feeling more comfortable with her and contributing to increasing the rating from Bronze to Silver.
Black: And what about performance particularly with the US trade war impacting on China.
Miller: So I mean she's looking at China as I said from a value side. So actually she's picking parts of the market that might be unloved. So recent performance has been a little bit mixed but what we see is the portfolio construction that we like in that you can be a value investor and deviate very heavily. She's got some slight kind of buffers in place, but we think that’s enough to still express herself as an active manager and ultimately over the long term this has still been to be able to deliver. So for some people a bit different in China and what we quite like it and that’s why the Silver rating was put in place.
Black: Thank you.
Miller: Pleasure.
Black: And thanks for joining us.
