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Citywire Ratings: Terry Smith and Lindsell Train protégé shine

Fundsmith Equity's star manager and Lindsell Train's James Bullock are among the 10 managers we highlight moving up to Citywire's top rating.

The strong 2019 for stock markets has gathered strength: the US S&P 500 and Nasdaq indices yesterday hit all-time highs while, closer to home, the UK stock market has enjoyed its best start to a year since 1998.

Here we highlight some of the managers with the best records not only of navigating the buoyant markets since the turn of the year, but who also weathered the sell-off that hit at the end of 2018.

All of the 10 featured have moved up to Citywire's top AAA rating this month. The methodology for our ratings is here.

Click through the slides to see which managers are on the up this month. 

To see all the slides on the same page, click here.

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The strong 2019 for stock markets has gathered strength: the US S&P 500 and Nasdaq indices yesterday hit all-time highs while, closer to home, the UK stock market has enjoyed its best start to a year since 1998.

Here we highlight some of the managers with the best records not only of navigating the buoyant markets since the turn of the year, but who also weathered the sell-off that hit at the end of 2018.

All of the 10 featured have moved up to Citywire's top AAA rating this month. The methodology for our ratings is here.

Click through the slides to see which managers are on the up this month. 

To see all the slides on the same page, click here.

Leave a comment!

Please sign in or register to comment. It is free to register and only takes a minute or two.

Terry Smith

Fundsmith Equity

Star manager Terry Smith is no stranger to our top AAA rating thanks to the stellar performance of his flagship global equity fund.

Smith held an AAA rating consistently from October 2015 to January 2019, after which he dropped down to AA for two months, before recovering the top ranking.

The UK’s largest fund, with assets of £18.6 billion, has returned 71.9% over three years, placing it fifth of 181 funds in the Investment Association’s Global sector over that period.

With consistently good returns, it’s not hard to see why Smith remains perennially popular with investors. Smith focuses on companies with high returns on capital employed (ROCE).

Speaking at a seminar last month, Smith said veteran investor Warren Buffett focused on ROCE but this had been ‘ignored by the investment industry’, which continues to focus on earnings per share.

He gave Unilever (ULVR) as an example, stating that it made a 20% ROCE each year, while its capital cost is between 8% and 9%.

‘It’s not that complicated,’ said Smith. ‘If you borrow money from a bank and invest it in a fund that compounds at 17% or 18% per annum you would become richer. If you borrow at 5% [interest] and you make 2% [from the fund], it will make you poorer.’

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James Bullock

Lindsell Train Global Equity

Lindsell Train protégé James Bullock has moved up to a triple-A rating this month, ahead of his senior colleagues Nick Train and Michael Lindsell, founders of the fund group.

Bullock has nipped ahead of Lindsell and Train in the ratings as his rating is derived solely from his work on the group’s best performing fund, the £6.7 billion Lindsell Train Global Equity.

Lindsell and Train are being held back by their other funds, which while still strong, haven’t performed quite as spectacularly as the global fund: Lindsell Train Japanese Equity and UK Equity respectively.

Lindsell Train Global Equity’s 83.7% return over three years places the fund top of the Investment Association’s Global sector over three years and ahead of its clearest rival, Fundsmith Equity, in that timeframe.

The rival funds share similar approaches: both are relatively concentrated portfolios of less than 30 stocks, and both feature what Bullock called ‘boringly predictable compounders’ like Unilever in his most recent update.

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Will Sutcliffe

Baillie Gifford Emerging Markets Leading Companies

After a difficult end to 2018, Will Sutcliffe’s fund has rebounded this year and pushed the manager back to an AAA rating.

The fund fell 11.8% over 2018, but has fared far better over a three-year timeframe, delivering 75.4% to investors. That places the £555 million fund, which is 30% invested in China, third in the Investment Association’s 57-strong Global Emerging Markets sector.

Earlier this month, Sutcliffe’s fund was one of just two dozen highlighted by BMO Asset Management’s quarterly FundWatch report as a consistent top performer, with returns in the top quarter of its sector in each of the previous three 12-month periods.

Sutcliffe has a bias towards mega-cap stocks meaning it has a large weighting to technology and financial services companies, both of which struggled last year. As the fund is concentrated on just over 40 stocks, six of its top 10 holdings account for around 30% of its assets.

The fund’s top three positions are Taiwan Semiconductor (2330.TW), Samsung Electronics (005930.KS), and Tencent (0700.HK).

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Ken Wotton and Brendan Gulston

Gresham House UK Micro Cap

The domestic market, and particularly the junior Alternative Investment Market, hasn’t been the easiest place to invest since the EU referendum in 2016 but this Gresham House pair have managed to hit the top rating on more than one occasion.

Ken Wotton and Brendan Gulston had an unbroken run at AAA status from August to January before two months at AA but have regained the top rating this month.

Gresham House UK Micro Cap was launched in 2009 and is still a minnow at £168 million but with big returns. In the past three years it has delivered 45.5%, placing just inside the top 10 of the Investment Association’s 48-strong UK Smaller Companies sector over that period.

The pair’s other fund, Gresham House UK Multi Cap, is younger, having launched in June 2017. Since then it has returned 13.9%, topping the UK Equity Income sector over that period.

The pair believe that ‘weaker sentiment’ towards UK stocks will continue this year but this will ‘produce some attractive value opportunities’.

‘We continue to focus on less cyclical, high quality, niche growth businesses, which we believe can deliver strong returns through the market cycle and regardless of the wider economy,’ they said.

The largest holdings in the fund are Filta Group (FLTA), which provides environmental kitchen solutions, legal services business Knights Group (KGHK), and pension consultants Mattioli Woods (MTWL).

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Tiffany Hsiao

Matthews Asia Funds China Small Companies

Tiffany Hsiao has regained a triple-A rating after dropping down to AA during February and March.

She had sat at AAA consistently from July 2018 to January 2019 despite the turbulence in the Chinese stock market last year thanks to the country’s tariffs tit-for-tat with the US.

The fund has returned 66% over the past three years, benefiting from a bounce in prices at the beginning of this year as sentiment improved due to confidence in fiscal and monetary policies from the Chinese government.

Hsiao said in her latest update she was confident ‘the worst is likely over’ for Chinese businesses and believes structural growth is encouraging longer term.

She is ‘cautiously optimistic’ for China’s small-cap market and believes ‘China has the ability to stabilise its economy through fiscal spending, interest rate adjustment, and currency management’.

Hsiao will continue to focus the fund on ‘industrial automation, healthcare, and technology’, which are all attractive ‘from a secular growth perspective’.

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Rollo Roscow and Mohsin Memom

Schroder ISF Emerging Europe

Rollo Roscow and Mohsin Memom have been awarded AAA status this month after delivering strong returns despite the difficulties faced by the emerging Europe market they operate in.

Their £747 million fund, which houses 10% of its assets in Turkish stocks, was among those hit by Turkey’s currency crash last summer, but over three years a 61.8% return places it second of 30 in Citywire’s Emerging Markets Europe sector.

The pair said European activity indicators had ‘continued to disappoint, with weak external trade a headwind’, however the dovish change from the European Central Bank has led them to shift expectations of an interest rate rise out to 2020.

Hungary is the fund’s largest overweight where ‘the macroeconomic environment is supportive and valuations are reasonable’, said the managers.

‘Turkey is held at neutral weight. Valuations are cheap and we have identified a number of mid-cap stock opportunities. However, policy concerns persist and the macroeconomic outlook is weak.’

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David Keetley and Stephen McCormick

Polar Capital Global Convertible

David Keetley and Stephen McCormick have see-sawed between double and triple-A status over the last year and this month sees them return to the top rating.

The pair’s Polar Capital Global Convertible fund has delivered 31.2% over three years, well ahead of the 22.3% from Thomson Reuters’ convertible bonds index.

The pair believe the volatility in markets since last year has strengthened the case for convertibles, which are a half-way house between bonds and shares that provide income with the chance for capital growth.

‘This uncertainty, be it geopolitical, macroeconomic, or monetary policy-related, we believe is prime for convertibles to be chosen as the optimal vehicle for a company to raise capital or for an investor to invest capital,’ said the managers.

Their success earned the pair a new fund this year, as Polar Capital launched a long/short absolute return strategy with a convertibles focus.

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