Four of the 10 managers we have highlighted as rising up our Citywire Fund Manager Ratings this month are focused on emerging markets, in a difficult year for the sector.
Emerging markets tumbled into bear market territory earlier this year, weighed down by a strong dollar that has hurt developing economies with borrowings in the currency.
The emerging markets managers rising up our weightings are among those who have best weathered the storm. Their rise highlights how our fund manager ratings system is not just about which are able to make the most money, but how they perform relative to the market they are operating in. Limiting losses when markets are tumbling is just as valuable a skill.
And that was the name of the game during ‘Red October’. Few of the fund managers who have risen up or ratings this month actually made money during October, as global stock markets took a dive. Those who kept a lid on losses were the ones to move up
As global stock markets tanked during ‘Red October’, shares in Brazil soared after the election of far right candidate Jair Bolsonaro as the country’s president.
That drove the performance of the Artemis Global Emerging Markets fund last month, which has an 8.6% exposure to Brazil.
The fund’s holdings in Brazilian banks Banco Do Brasil and Itau performed well as a result, as did oil company Petrobras.
That helped manager Raheel Altaf regain his Citywire AA rating, after a rocky few summer months when emerging markets entered bear territory.
The fund, which Altaf manages with Peter Saacke, has delivered 56.6%, well above the 39.2% average from funds in Citywire’s Global Emerging Markets sector.
Neptune Emerging Markets’ performance was also buoyed by the rally in Brazilian stocks, which makes up 18.3% of the portfolio, well above the index weighting of 8%.
The fund’s three-year return sits at 52%, helping Thompson to also regain his double-A rating.
Russia is another major overweight position in the portfolio, which holds 16.7% in the country against a meagre 3.9% in the index.
Thompson has said he was betting big on Russia thanks to its ‘very high yielding and very cheap’ stock market’, with valuations at a 50% discount to broader emerging markets.
He has three Russian oil and gas companies in his top 10 holdings: Novatek, Lukoil and Gazprom Neft.
Thompson also appears to be undeterred by the effect of US tariffs on China and last month’s sell-off, in which technology stocks were among the hardest hit. His biggest regional weighting is to China and Hong Kong, at 25.2%, while Tencent and Alibaba are counted as top 10 stocks, at 4.2% and 3.5% respectively.
Charles Glasse and his small £48 million Waverton European Dividend Growth fund may be unknown to some, but his record over the last three years beats that of more famous rivals, earning him Citywire’s top AAA rating.
The fund’s 52.5% return over three years is second only to the Marlborough European Multi-Cap fund’s 67.5% in the Investment Association’s Europe ex-UK sector.
Glasse’s portfolio is one of a trio of income funds, alongside Montanaro European Income, to sit at the top of the sector over that period, ahead of the likes of Citywire A-rated Alexander Darwall’s Jupiter European fund.
Glasse runs a concentrated portfolio, with just 35 stocks. Swiss pharma giant Novartis is the top holding at 5.1% of the portfolio, followed by German chemicals company Linde, smokeless tobacco maker Swedish Match and Danish pharma business Noro Nordisk.
Both the Royal London Ethical Bond and Royal London Sterling Extra Yield Bond funds currently sit at the top of their respective fixed income sectors for performance over the past year, helping Eric Holt to move back to a Citywire AA rating.
Over three years, the £1.8 billion Royal London Sterling Extra Yield Bond holds onto the top spot in Citywire’s Sterling Strategic Bond sector, up 30.8%. This leaves a decent gap with next best sector performer, Sanlam Strategic Bond, up 23.4% in three years.
Holt favours higher-yielding junk bonds, with bonds rated BB or below, and unrated bonds, making up nearly three-quarters of the portfolio.
The £631.9 million ethical bond fund ranks 16 of 103 funds in Citywire’s Sterling Corporate Bond sector over three years, having returned 18.3%.
With a less ambitious yield target, this fund’s holdings sit higher up the quality spectrum, with nearly three quarters in A and BBB-rated debt.
It has more bias to the investment grade range of bonds, with 48.8% in BBB-rated assets and 25.5% in the A-rated debt.
Mark Asquith celebrates a decade as lead manager of the Somerset Emerging Markets Small Cap fund by earning a Citywire AA rating for the first time.
His fund tops Citywire’s Global Emerging Market Smaller Companies sector over three years, with a return of 46.6%. Asquith has dodged the worst of the bear market in emerging markets, with his fund down 7.3% over 12 months, versus an average 12.4% for the sector.
As a small cap focused portfolio of around 45 stocks, its top 10 holdings include the Johannesburg and Warsaw Stock Exchanges.
Other key holdings are Malaysian fashion retailer Padini, Korean SungKwang pipe fitting manufacturer and Taiwanese waste disposal company Sunny Friend Environmental Technology.
Like Charles Glasse, George Cooke is another lesser-known European income manager enjoying a strong run that is reflected in his move up to a Citywire A rating.
His Montanaro European Income fund, focused on small and medium-sized European companies, has returned 50% over the last three years, versus the 40.1% average for funds in Citywire’s European Small & Medium Companies sector.
The populist Italian government’s stand-off with the European Union over its budget, and the UK’s Brexit negotiations have buffeted European markets this year, but Cooke, is not letting politics influence his portfolio.
‘Europe would not be Europe without some form of political uncertainty, be it Brexit, the Italian debt situation or even the record low approval rating of France’s president, Emmanuel Macron,’ he said in his latest update to investors.
‘While such events naturally grab the headlines, recent history suggests that investors who have positioned portfolios around politics have had their fingers burnt. Consensus has been wrong on the outcome of many an election during the last few years.’
Value-focused fund manager Ben Whitmore has regained the Citywire A rating he last held in March, thanks to the solid returns of his UK-focused funds in a difficult market.
Whitmore’s £2.4 billion Jupiter Income Trust is up 29.2% over three years to the end of October, more than double the average 13.6% for managers in Citywire’s UK Equity Income sector. The £1.9 billion Jupiter UK Special Situations fund is up 29% over the same period, versus an average 19% in the UK All Companies sector.
Whitmore has been branching out overseas in recent years, running the Jupiter Global Equity Income fund since October 2016. In the same month, he took on the Luxembourg-based Jupiter JGF Global Value fund, while a UK-based version of the fund, Jupiter Global Value Equity, was launched earlier this year. But these are not contributing to his rating, with the manager having not yet achieved the requisite three-year track record.
The manager is currently favouring oil, tobacco, pharmaceutical stocks and insurers in his UK funds, with BP, GlaxoSmithKline, Aviva and Imperial Tobacco in the top five holdings for both.
Alastair Bishop runs a range of commodities funds for BlackRock, and it is two of them, a US and a Luxembourg-based portfolio, which have contributed to him moving up to a Citywire A rating.
He hasn’t yet notched up the required three-year track record on his UK fund, the £64 million BlackRock Natural Resources Growth & Income fund, having joined Tom Holl and Skye Macpherson in running the portfolio in March 2016.
The fund is split between mining, energy and agriculture assets, and Bishop is ahead of the average manager over the last year, in a mixed 12 months for the sector.
In the fund’s latest annual report, covering the 12 months to the end of February, the managers sounded a bullish note on natural resources sector, saying it was ‘still in the early stages of a cyclical recovery’.
‘We expect returns for natural resources companies to move back up towards long-term averages, as historically, their shares have performed strongly in such environments,’ they said.
Philip Dicken is taking his Citywire A rating with him to Luxembourg, after his £1.9 billion Threadneedle Pan European Smaller Companies fund was switched out of the UK to the popular European fund home last month.
Dicken’s fund is one of a number of Columbia Threadneedle funds held in the majority by non-UK European Union investors. The group earlier this year announced plans to move some of these from the UK to Luxembourg to provide investors with ‘certainty and continuity’ as the UK leaves the EU.
Dicken, head of European equities at the group, has manged the fund since 2005, and has delivered 51.5% over the three years to the end of October, ahead of 40.1% from the average manager.
Unlike most European funds targeted at UK investors, Dicken also invests in the domestic stock market. UK stocks represent his biggest weighting, at 28% of the fund, ahead of the 26.8% benchmark weighting.
UK stocks St James’s Place, Kingspan and Genus are among his biggest ‘overweight’ holdings.
Rishikesh Patel has earned a Citywire AA rating for his performance on the Irish-based BMO LGM Greater India fund, having not yet chalked up the requisite three-year track record on the BMO Emerging Markets Equity fund, which he began running in 2016.
Over one year, his emerging markets fund is down 7.4%, though in a torrid 12 months for the sector that is still ahead of the average 11% loss, placing it 60 of 280 funds in the Citywire sector.
The fund’s biggest exposure is to India, at 19.4% of the portfolio, which has been dragged down by the rise in the oil price, abating over the last month, given India’s status as the world’s third largest importer of the commodity.
The BMO LGM Greater India fund is meanwhile up 61.7% over three years, the second best performer of 45 funds in Citywire’s India sector over that period.