The investment research consultancy, which is a strategic partner of FE’s, launched the Academy of Funds in July, awarding funds an A, AA or AAA rating based on its view of how they will meet client expectations such as capital accumulation, income, capital preservation and inflation protection.
Three funds from Charlemagne, GLG and Schroders were awarded an "A" rating by Square Mile in the latest update to the Academy. In this article, we take a closer look at these portfolios.
Charlemagne Capital Magna Latin American
Square Mile has highlighted this fund, which takes a stock-picking approach to Latin American equities, as being a good option for investors seeking capital growth.
Senior investment research analyst Amaya Assan said: “This fund benefits from the manager Ian Simmons and his team’s knowledge of local markets and companies which, coupled with a strict focus on the quality of the investments and attention to valuation, could be a compelling choice for investors seeking access to the region.”
“The investment approach and process is sensible, with the whole team aiming to invest over the longer term in well-run companies that are capable of growing their earnings on a sustainable basis. We see this fund as a solid offering for long-term minded investors.”
Simmons has managed the €64.8m fund since March 2009, over which time it has returned 108.66 per cent and beaten its MSCI Emerging Markets Latin America 10/40 benchmark by close to 35 percentage points.
It resides in the IMA Specialist sector, so we have only compared performance against the index.
Performance of fund vs index over manager tenure
Source: FE Analytics
Our data shows the fund has been slightly less volatile than the benchmark while Simmons has been at the helm.
Its maximum drawdown – which shows the loss of an investor who bought and sold at the worst possible moments – is also just under the benchmark’s.
The four FE Crown-rated fund holds between 30 and 60 stocks. Its largest holdings are currently Brazilian brewing company AmBev, Mexican bank Banorte and Brazilian financial services group Bradesco.
More than half of the portfolio is in Brazilian stocks, with Mexico accounting for one-third and Chile and Colombia 5 per cent each.
Charlemagne Capital Magna Latin American has an ongoing charges figure (OCF) of 1.64 per cent.
GLG Undervalued Assets (Professional)
This is a relatively young fund, having only been launched in November last year under the leadership of FE Alpha Manager Henry Dixon. He was joined by Jack Barrat in October 2013.
The fund seeks to invest in companies that Dixon believes are undervalued by the market, using the same process that he used with success on the FP Matterley Undervalued Assets fund.
The Matterley fund, which Dixon still manages on a sub-advised basis, is first quartile over one, three and five years.
GLG Undervalued Assets has returned 8.90 per cent since launch, which is almost double the 4.46 per cent gain in the FTSE All Share and 5 percentage points more than the average IMA UK All Companies fund, in what has been a tough period for UK equities.
The fund is in the sector’s second decile since inception.
Performance of fund vs sector and index since launch
Source: FE Analytics
Square Mile investment research analyst Andrew Johnston said: “The fund has a clear and delineated investment approach focused on uncovering out-of-favour opportunities. The manager must have high conviction in a company's recovery potential and the temperament to invest when others are fleeing.”
“Given the contrarian nature of the process and willingness to invest in medium and smaller sized companies, this fund at times may look and act very differently to its peers and benchmark. This can lead to impressive periods of outperformance, but there is also the potential for it to struggle when this investment style is out of favour.”
Johnston adds that the fund could complement many UK equity investment strategies and is worth consideration from “more benchmark-agnostic investors”.
The portfolio’s largest holdings are HSBC, Imperial Tobacco, BP, Friends Life and Lloyds Banking Group.
Its biggest sector overweights are to real estate and consumer durables, while it is underweight food, beverage, tobacco and healthcare.
GLG Undervalued Assets has clean ongoing charges of 0.96 per cent.
Schroder Strategic Credit
Peter Harvey’s £744m Schroder Strategic Credit fund is tipped by Square Mile for investors seeking income, after being highlighted for its track record in paying out a steady income stream.
The fund is managed with an absolute-return mindset, which means it can return less in total return terms than its peers in the IMA Sterling Strategic Bond sector at times. FE Analytics data shows it is fourth quartile over one, three and five years.
Performance of fund vs sector since launch
Source: FE Analytics
However, Square Mile focuses on the fund’s abilities in income generation. According to our data, it has paid out £486.89 on an initial investment of £1,000 at launch in April 2006.
Victoria Hasler, senior investment research analyst at Square Mile, says: “The manager asset allocates between investment grade and high yield credit as he sees fit, resulting in an attractive income stream. Mr Harvey, who has managed the fund since its launch (under the Cazenove banner) in 2006, has proved himself adept at maintaining value over longer time periods and has created an impressive dividend profile on the fund.”
“Whilst the yield varies somewhat depending on market conditions, the absolute value of the dividends on the fund has been remarkably consistent for most of the fund’s life. We believe this is an attractive feature and makes the fund a compelling option for investors looking for a steady income stream from a corporate bond fund with limited interest rate risk.”
Schroder Strategic Credit has a 1.12 per cent OCF and yields 4.81 per cent.
