The Morningstar European Fund Manager of the Year Awards are now entering their third year, and the 2012 nominees are a truly exceptional group of talented managers.
The awards are based on the forward-looking insights of our team of more than 30 fund analysts across Europe. While nominees should have produced strong performance for investors in the last calendar year, in keeping with our approach to qualitative research, we place a great deal of emphasis on the overall merit of the offering using our five-pillars assessment. In addition to performance, we weigh the quality of management, the strength of the process used to run the fund, the quality of the parent organisation--including how it treats investors in its funds--and costs.
We launched the awards programme in 2009 as a way to point investors to managers who truly stand apart from the crowd and to highlight the best research of our analyst team. Over the ensuing period, our research in Europe has continued to grow, with our analyst team expanding and 1,400 funds now under coverage.
Based on the strength of that research, we are pleased to announce the nominees for the 2012 European Fund Manager of the Year Awards. Once again, we are giving two awards that recognise the best fund managers in all of Europe: European Equity Manager of the Year and Global Equity Manager of the Year.
The managers nominated by Morningstar’s European analyst staff for each award are as follows. The winners will be announced at the Morningstar Investment Conference, Europe, in Vienna on 15 March.
European Equity Manager of the Year
Charles Montanaro
Montanaro European Smaller Companies
Charles Montanaro boasts many of the qualities we like to see in a manager. His experience in European small-caps dates back nearly three decades and he has put this to excellent use through setting-up specialist European small-cap asset manager, Montanaro. He has built a strong team of experienced analysts and managers and developed a sound and diligent investment process which is applied firmwide. Even better, he has managed to alleviate much of the conflicts of interests in being a fund manager and firm owner. For example, he is a major investor in his funds which reflects conviction in his approach. Also, we think the funds’ performance fee structure better aligns the manager's interests with those of fund shareholders.
Montanaro has put together a rigorous investment process and his team’s research is integral to the success of Montanaro European Smaller Companies, the firm’s flagship fund. He draws on his in-house resources to find growing companies with strong balance sheets, cash flows, and dividend yields in niche areas. We believe his long experience in the sector gives him an edge as he has worked closely with decision-makers at companies over the years and developed a strong understanding of growth prospects and barriers thereto. Montanaro patiently holds companies while they achieve their full growth potential; this is evident in his portfolio’s low turnover rate.
The manager’s long-term approach has been clearly in evidence over the last few years. In 2008 the fund experienced a significant decline, losing EUR 52% of investors’ money. Importantly though, Montanaro maintained his approach, and did not significantly alter the portfolio. Investors in the fund consequently benefited from a very strong recovery in both 2009 and 2010. The fund returned 51% and 43% respectively in these years, thereby recovering the losses sustained in 2008 and significantly outperforming peers in his Morningstar Europe Small-Cap Equity category. Although the fund then lost 13.3%% in the difficult markets of 2011, the manager protected investors’ capital much better than his rivals, which were down 3.2 percentage points more on average.
Laurent Dobler and Arnaud Cosserat
Renaissance Europe
Laurent Dobler and Arnaud Cosserat are highly experienced European equity fund managers. Dobler joined the Paris-based boutique Comgest in 1991, while Cosserat joined in 1996. The two head Comgest’s team of eight European equity fund managers, where stability has been a hallmark. They have built an excellent track record at French-domiciled flagship fund Renaissance Europe, and are also responsible for the firm’s offshore European equity vehicles, which are all managed collectively. Their strong long-term results epitomise Comgest’s proven and highly distinctive approach to asset management, best summarised as “quality” and growth” in that order. As such, they will not invest in highly cyclical names, and they avoided financials well before the 2007-2008 meltdown. While their approach does lead to periods of underperformance, as evidenced in 2009, when the market was led by lower quality stocks, it has more importantly protected investor capital during severe market downturns such as 2008 and 2011, and has resulted in strong compounded returns over time. This, combined with Dobler’s and Cosserat’s commitment to acting as responsible stewards of investor capital make them obvious candidates for our Fund Manager of the Year Awards.
Fabio Di Giansante
Pioneer Funds Euroland Equity
Fabio Di Giansante took over the management of Pioneer Funds Euroland Equity in August 2006 and since then he has delivered impressively for investors in the fund across very different market conditions—an exceptional feat given market volatility in the period. He has accomplished this by focusing firmly on bottom-up stock selection, seeking out quality growth companies whose potential he believes has not been fully recognised by the market. While he can rely on Pioneer’s larger research staff to generate ideas, he has combined the role of manager and analyst in the past and is not afraid to put his own ideas into the fund, as illustrated by Ryan Air, a long term holding for this portfolio. Di Giansante’s also stashes up to 25% of the fund’s assets in “satellite” stocks that are shorter-term plays, and we think this has helped give the fund an edge.
While market conditions have led to a slight loss here over the past five years, the fund fell less than 90% of it its Eurozone Large-Cap Equity peers in the period and ranks in the category’s top quintile over the past one, three, and five years. It has achieved this with slightly less volatility than the norm. The fund has also been relatively easy for investors to stick with: It has performed in the category’s top quartile in every calendar year under Di Giansante save 2008, when it was in line with the peer group median.
Global Equity Manager of the Year
Kristoffer Stensrud, Knut Harald Nilsson, Cathrine Gether and Ross Porter
SKAGEN Kon-Tiki
Veteran manager Kristoffer Stensrud is one of the grizzled veterans of the fund world—a rarity in an industry characterised by high manager turnover. He co-founded SKAGEN in 1993, has managed this emerging-markets fund since its 2002 inception and has also managed other offerings including SKAGEN Vekst and SKAGEN Global along the way. Remarkably, at this fund he has been able to beat his benchmark index every calendar year since 1993, a rare accomplishment.
As assets have grown, SKAGEN has added resources to their offerings. Knut Harald Nilsson joined in 2006, he has analytical experience dating back to 1993, Cathrine Gether joined in 2009 and Ross Porter moved internally to strengthen the team further in 2011, but he’s been part of the portfolio team since 2000. We think the people behind this fund are key to its success. The team’s process can best be described as a contrarian style, where the managers look for bargains, hunting among the unloved and the forgotten for portfolio candidates. It’s all about finding stocks and ideas, and they exhibit a high degree of flexibility. They are also willing to own developed-markets equities with emerging exposure if they believe they offer the best opportunity. The financial sector, which has yielded healthy returns for investors in the fund, has featured very different picks than competitors. Names such as Aberdeen, Standard Chartered and Gjensidige have all found their way to the portfolio. Flexibility alone is not enough, however: it must be put into good use, and Stensrud et al have excelled. The fund delivered an annualised return of EUR 17.8% per year from 1 May 2002 through 31 December 2011, more than double the EUR 7.1.% annualised return of the average Global Emerging Markets fund in the period.
Andrew Headley; Charles Richardson
Veritas Global Equity Income, Veritas Global Focus
Charles Richardson and Andrew Headley are a highly experienced management pairing who have successfully managed both Veritas Global Focus and Veritas Global Equity Income, delivering strong records of consistent outperformance. The two previously worked together at Newton Investment Management and have co-managed these two funds at Veritas since June 2005 where they are supported by an experienced and stable analyst team. The managers make good use of the team and diligently apply the theme-based process in which they clearly have great belief. This has led not only to considerable outperformance but consistent outperformance across the two different mandates in differing market conditions.
Over five years to the end of 2011, Veritas Global Equity Income has outperformed its Morningstar Global Large-Cap Value Category by EUR 7.9% p.a. and Veritas Global Focus, residing in the same category, has outperformed its peers by 8.0% p.a. Both funds outperformed their M* Category and MSCI ACWI Index in 2006, 2007, 2008 and 2009. In 2010 when many global equity income funds struggled, Veritas Global Equity Income lagged the index by 131 bps but and outperformed its category by 2.8 percentage points. In 2011 when an underweight to US particularly hurt non-income focused funds, Veritas Global Focus beat the index by 7.3 percentage points and outperformed its category by 9.4 percentage points.
Rajiv Jain
Vontobel Global Value Equity, Vontobel Emerging Markets Equity
Rajiv Jain covers a large investment universe, including both developed and emerging global equities. To succeed in this large arena, there is a clear need to adopt a rigorous, replicable investment process and Jain’s approach fits these criteria well. He looks for high-quality businesses that show strong and sustainable growth, where he can form a high degree of confidence predicting their earnings over the next five years. To find such opportunities, he has the backing of eight analysts based with him in New York, organised according to sector specializations.
The strategy can often lag when lower-quality stocks rally, as was the case at both of these funds in 2009. However, the long-term benefits are clear: First and foremost, downside risk is notably dampened relative to peers. In 2011, for example, Jain’s Vontobel Global Value gained 7.4% EUR, compared to a loss of 7.7% EUR for its average Global Large-Cap Growth peer. Similarly, Vontobel Emerging Markets gained 0.05% EUR in 2011. That admittedly does not sound enticing, but it is jaw-droppingly good in the context of an 18.3% loss for the fund’s average Global Emerging Markets Equity peer.
These funds aren’t for investors seeking outperformance in every environment, but we are impressed by Jain’s stock-picking nous and high degree of conviction in his process, and his ability to deliver excess returns while limiting losses over a full market cycle. For investors, that’s a great combination.
To find out who won the Morningstar UK Fund Awards for 2012, read “Are You Invested in These Award-Winning Funds?”
