Hello and welcome to this week’s Morningstar
Manager Check-up for our views on three funds we’ve recently reviewed.
Threadneedle UK Equity Income has been managed by Richard Colwell since mid-2012. He used
to work with Leigh Harrison on a co-manager basis for over a decade, but when Harrison
retired in 2016, we saw it as a blow. Having said that, Colwell has a team of 10 around
him, so over all we feel he’s well-supported. The fund is managed with a balanced approach
to both income and growth. Holdings tend to fall into two broad categories:
cash flow compounders with a consistently high return on common equity and more contrarian
ideas where established companies are experiencing short-term difficulties. This gives the flexibility
to invest across growth and value situations. This pragmatic thinking with a long-term view
has served investors well over time, providing strong risk adjusted performance. The combination
of manager experience and pragmatism, together with support from a well-resourced team, result
in a Morningstar Analyst Rating of Silver. Ian Spreadbury has been at the helm of the
Fidelity MoneyBuilder Income fund since inception in 1995. Then in 2015, Sajiv Vaid, a well-respected
name in the space joined as co-manager, which we saw as a strong addition. This is a UK
corporate bond offering, driven by the duo’s top-down views, with a reliance on Fidelity’s
well-resourced research platform for bottom-up ideas.
Spreadbury built the team and designed the investment process, so we feel he’s able
to get the most out of the analysts in place. The managers have retained a cautious stance
in recent years based on their expectation of low global economic growth and low inflation.
Despite recent underperformance, owing to the underweight duration stance and sector
positioning, the fund’s long-term record has remained outstanding.
We see this as proof of the tried and tested process implemented by Spreadbury through
many credit cycles, meaning the fund holds a Morningstar Analyst Rating of Gold.
The set up on the JPM US Select Equity fund sees Scott Davis run about two thirds of the
portfolio, the analyst team’s best ideas make up 25% and Susan Bao handles the remaining
10%. The process sees sector deviation rarely go 2% wider than the index and stock picks
are based on the analyst team’s proprietary dividend-discount model. With around 150 holdings,
the portfolio’s well-diversified and the top 10 positions make up just 20% of assets.
Ultimately this is designed to outperform incrementally, primarily through stock selection.
Results testify to the effectiveness of a robust process, skilfully executed by a strong
team of portfolio managers and analysts. The fund’s low expenses are an additional
edge and we see this as a sound core holding that maintains its Morningstar Analyst Rating