Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Lena Tsymbaluk. She is from the Morningstar Manager Research team. Hello.
Lena Tsymbaluk: Hi, Holly.
Black: So, this week, it's been International Women's Day. So, we're thinking all things female at Morningstar. You're going to talk us through some of the rated funds that are run by a female fund manager. Where should we start?
Tsymbaluk: Yes. So, I wanted to start with JPM Asia Growth. And actually, it's interesting that some of the biggest funds managed by women come from JPMorgan. And in fact, 45% of the growth – of the global assets are managed by – or co-managed by women. And the first two female managers that I'm going to talk about are from JPM as well.
So, Joanna Kwok has co-managed the Gold-rated JPM Asia Growth with Mark Davids since 2015 and she has a longer track record on the Silver-rated JPM Asian Smaller Companies which she has led since 2013. Both track records are impressive with top quartile performance in their respective peer groups over three and five years.
Joanna attributes her success to the disciplined investment approach with the support of a big research team. The approach is quality growth favoring stocks with quality franchises as well as sustainable return on invested capital. Unsurprisingly, for a growth-oriented strategy it tends to overweight sectors such as technology and consumer discretionary, while the largest underweights are in cyclical sectors such as materials and energy, for example. So, the strategy would typically have names such as TSMC, Alibaba, Tencent. So, the strategy is currently 6 billion, but the estimated capacity is 10 billion. So, it's still open.
Black: So, that's so interesting that JPMorgan have such an equal weighting of female and male managers running their assets. What's the second fund from JPM that you've got for us?
Tsymbaluk: Yes. So, the second fund is JPM US Equity Income. It has been managed by Clare Hart. It is rated Gold by Morningstar as well. It happens to be the largest U.S. equity strategy managed by a woman. The strategy's total AUM 34 billion. It is still open though as well. Clare has managed it since 2004. She focuses on companies with attractive dividend yields, but also favors high-quality companies, so those with durable franchises, consistent (clients) and conservative financials. The preference for quality is demonstrated by high percentage of wide moat ratings compared to peers. And given her investment style, basically which is seeking sustainable income from healthy companies rather than maximizing yield and compromising on quality, it leads to the strategy's risk and downside capture ratio lower than peers, which is quite an attractive feature as well. And finally, Clare won Morningstar's Fund Manager of the Year Award in 2020, recognising her remarkable style and approach and leading to exceptional returns.
Black: She did indeed. So, we're moving away from JPMorgan for our final fund. Which is it?
Tsymbaluk: Yes. So, the final fund is Legg Mason Royce US Smaller Companies. It has been managed by Lauren Romeo since 2011. And Lauren is a seasoned manager with 27 years of investment experience. She has consistently implemented Royce's trademark small cap investment process. It focuses on buying quality names with sustainable earnings, high return on investment capital and strong free cash flows as well. And key part of the process is such companies when they are out of favor. So, basically, she seeks to buy a stock trading at 30% to 50% discount. Although the strategy has struggled lately due to the value style headwind, it has consistently scored highly on quality metrics and high ROE and lower debt to capital ratios compared to the index and peers. And finally, the strategy has also earned its above average Morningstar sustainability rating.
Black: Lena, thank you so much for your time. For Morningstar, I'm Holly Black.
