Elite Providers for Equities: new funds rated

At the start of each year, we conduct an extensive piece of research to identify which fund management companies have shown they can add value for their equity investors year in, year out.

The research looks at the entire range of equity funds run by a company over a five year period and the result is our annual Fund Management Equity Index and our awards for the ‘Elite Providers for Equities’- now both in their fifth year.

For the second year in a row, Morgan Stanley claimed the number one slot in 2019. So our fund research team went to meet their managers and assess each individual fund for an Elite Rating.

Morgan Stanley Global Brands gets an Elite Rating

Morgan Stanley’s investment team has been particularly strong within its global and US franchises in recent years. But the stand-out fund for us, was Morgan Stanley Global Brands.

It’s a very concentrated fund, investing in just 25-30 companies, but they will be familiar names: the likes of Heineken, Unilever and Microsoft for example, are all current top ten holdings*.

The managers look for high quality companies with intangibles assets like strong networks and brands, or licenses and permits that can provide an advantage over competitors. They will also look for companies benefiting from economies of scale and leading market distribution.

We had no hesitation in awarding the fund an Elite Rating and continue to monitor a number of other portfolios.

Two Comgest funds gain a Rating

Comgest was a new entry into the top ten Elite Providers for Equities in 2019 and we paid them a visit too. The strength of the Comgest franchise is the fact that the same, very well defined, investment process is used across its entire equity fund range – a process that has been used successfully for more than 30 years.

We really like Comgest’s structure and culture. It has a strong focus and an emphasis on long-term investing. Portfolio managers all work as analysts and the majority of the staff – including those not in the investment teams – have a stake in the business, which very much aligns their interests with those of their clients.

We particularly liked the Comgest Growth Europe ex UK and Comgest Growth Japan funds. Both have been awarded an Elite Rating.

Magna Emerging Market Dividend moves to an Elite Radar

In other news, Mark Bickford-Smith, lead manager of Magna Emerging Market Dividend fund, retired at the start of this year, handing over the reigns to co-manager Ian Simmons.

Ian joined the firm in 2004 from Fidelity. He started as an Asian Analyst before transferring his coverage to Latin America and becoming a portfolio manager. He has been co-manager of the Magna Emerging Markets Dividend fund since 2017 and has been lead manager since Mark retired.

While there was a good handover period between Mark and Ian, it was not over our three year minimum period, so the AlphaQuest score for the fund can not be attributed to Ian. Therefore the fund must lose its Elite Rating.

However, the philosophy and process of the fund is solid and it offers a slightly different approach to emerging markets. Having met Ian and talked through his changes, we like those he has made in terms of the interaction with his team and his work in making stock promotion more inclusive and transparent. We are therefore happy to move the fund to an Elite Radar while Ian builds his track record.

Premier Defensive Growth loses its Elite Rating

And finally, Paul Smith, manager of Premier Defensive Growth, has resigned from the company. While Paul had a team of specialist helping him with investment ideas – two of whom, Daniel Hughes and Robin Willis, are now going to co-manage the fund using the same process – the track record for the fund and its AlphaQuest score were entirely attributable to Paul. It will also be the first time the two new managers are directly managing money. As a result, the fund unfortunately must lose its Elite Rating.

*Source: fund factsheet, 31 July 2019

The views of the author and any people interviewed are their own and do not constitute financial advice. However the knowledge that professional analysts have analysed a fund or trust in depth before assigning them a rating can be a valuable additional filter for anyone looking to make their own decisions. Before you make any investment decision make sure you’re comfortable and fully understand the risks. If you invest in fund or trust make sure you know what specific risks they’re exposed to. Past performance is not a reliable guide to future returns. Remember all investments can fall in value as well as rise, so you could make a loss.