Our fund recommendations are drawn from the whole of the market and selected using a two pronged approach with Morningstar’s analyst team providing unbiased in depth research that is analysed by our own Investment Team. We also carry out our own research and all recommendations are presented to and approved by TDDI’s Investment Committee.
As a result of our collaborative research we have introduced a number of new funds to the list. The new funds are intended to offer more variety in popular asset classes such as US equities, as well as access to additional asset classes including global emerging markets and global insurance which deliver further diversification benefits.
Matthew Vaight has managed the fund since its launch in February 2009. He takes a long-term view and adopts a bottom-up stock selection approach. The fund has a value bias as it seeks to invest in out of favour companies, often with a bias towards mid and small-cap names. The long-term performance record of the fund remains strong despite some short-term weakness. The disciplined investment process and value style makes it a timely and interesting addition to our Recommended Funds list.
The fund is run by a team of three, headed by Ian Heslop. It is managed using a multi-factor quantitative strategy with a qualitative overlay and has no particular style bias. Its aim is to ebb and flow with the prevailing style biases in the market. It copes well in weaker markets, and would be expected to perform best in trending markets while struggling more during periods of heightened volatility. The fund approach is a modern one, and one that has proved it can outperform in the US where many active managers tend to find it difficult; this is a welcome addition to the Recommended Funds list.
The fund, which has been managed by Audrey Ryan since 2000, combines a strict ethical screen with bottom-up fundamental analysis. The stock selection process assesses the ethical fundamentals of each company and combines this with an understanding of what the current valuation implies. The fund’s ethical mandate will result in a return profile which can deviate significantly from that of its benchmark. It typically has a bias towards mid-cap stocks and from a style perspective to growth stocks. This fund is a consistent member of our Best of British funds list, which we created based on the top performing UK equity managers with a 10-year track record.
The fund has been managed by Ezra Sun since inception in October 2004. He is supported by four analysts, two based in Hong Kong, and the firm’s global equity team. Sun adopts a thematic approach, blending core and shorter-term tactical views – the tactical overlay is designed to help the fund perform in different market environments. Overall the fund would be expected to outperform in a market environment where company fundamentals are being rewarded. The fund has a performance fee of 20% of the NAV, where the NAV is higher than both a high water mark and a hurdle rate. Despite this the performance track record (inclusive of all fees) is attractive. This fund complements our other Asian equity recommendations and benefits from Sun’s knowledge of the region and effective implementation of his process.
Financials is an interesting area in which to invest, and this fund offers access to the insurance sector within that. Emphasis is on finding quality companies with strong management teams, and those with the ability to grow equity per share. The fund tends to have a bias to mid-cap stocks and at a country level to the US. The specialist nature of the mandate and a bias to higher quality names can offer relative protection in weaker markets. The fund has a performance fee of 10% of the fund’s outperformance of the MSCI Daily Net TR World Insurance index. The managers are very experienced and have a proven ability of navigating the fund through sub sectors of the insurance industry while still maintaining a broadly diversified portfolio.
Standard Life Investments Global Absolute Return Strategies (GARS) has been a successful fund, delivering first quartile performance over five years and exceeding its Libor +5% target. Returns have moderated in recent years, however. It has now grown its assets to around £60 billion in the strategy. While the company believes the strategy has capacity beyond this level, we are uncomfortable as it is inevitable that as assets grow the opportunity set diminishes and liquidity can become an issue. The fund is managed by the Multi-Asset Investing Team, and relies on the idea generation and decision making of the Strategic Investment Group (SIG). Since 2010 only half the SIG remains from the original 12. While the team remains experienced and well resourced, it has lost its team head and changed substantially in recent years. We believe other absolute return funds are better placed to deliver positive returns ahead of cash over the medium term, and have removed the fund from our Recommended Funds list.
Long standing fund manager Angus Tulloch will step down from his lead role in July 2016. He will be succeeded by David Gait, who is lead manager on the group’s sustainability funds, with Sashi Reddy working alongside him. The fund’s investment mandate will also alter to follow the sustainability strategy developed and used by Gait on his Asia Pacific Sustainability fund. We are not comfortable with the change of mandate and as a result have removed the fund from our Recommended Funds list.
We have seen limited demand from our customers for this fund, however we are keen to continue to offer an ethical fund and have replaced this fund with Kames Ethical Equity which we believe will appeal to a wider audience.
In line with a wider industry trend we have witnessed less customer interest in and reduced demand for multi-asset funds within our Recommended Funds list. The removal of Jupiter Merlin Balanced, Jupiter Merlin Income and JPM Multi-Asset Income is a reflection of that, ensuring our Recommended Funds list best fits with our customers’ needs.
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