The Rated Funds that have been placed under ‘performance watch’

As part of our analysis of how Money Observer Rated Funds fared in the first quarter of 2019, we reveal the one fund ‘under review’ and those that have been placed on ‘performance watch’.

Funds and Investment Trusts April 18, 2019 by Andrew Pitts

Under review

JPMorgan Global Growth & Income IT

Jeroen Huysinga is leaving the fund management industry to pursue a career in the charitable sector. Huysinga was the sole manager on this global equity income trust from September 2008 until August 2017, when he was joined by Timothy Woodhouse as co-manager.

Rajesh Tanna and Helge Skibeli have joined Woodhouse as co-managers of JPMorgan Global Growth & Income IT. Huysinga will continue to support the new team through the summer and the investment process remains unchanged.   

In our opinion the management change in not a significantly negative event. However, it is appropriate to place the trust’s Rated Fund status ‘under review’ until there are signs that Huysinga’s departure has no material impact on its relative performance.

Jupiter UK Smaller Companies 

James Zimmerman has resigned from his position as manager of the Jupiter UK Smaller Companies fund. He will later this year be replaced by Matt Cable, who has been poached from M&G Investment Management. In the interim Richard Curling, who is lead manager on three other Jupiter funds, will take over the day-to-day running of the portfolio.

As a result Money Observer has decided to place the fund 'under review'. 

Funds on ‘performance watch’

Some Rated Funds that we continued to include from our 2018 list despite poor absolute or relative performance have not yet repaid our faith in them in the first quarter of 2019. In some instances, this is due to the investment style of the manager; or the portfolio’s positioning into, for example, unloved market segments that continue to be out of favour with investors.

We will continue to monitor performance of the following Rated Funds over the next three months and, where we feel our faith continues to be tested, will consider formally placing them under review.

In the UK equity income group, two investment trusts with experienced management teams are not living up to our expectations. Lowland is run by James Henderson and Laura Foll. It has a high exposure to domestically focused UK companies that could come good given a resolution to Brexit negotiations. Both Lowland and Diverse Income have a decent slug of exposure to smaller companies, which means they are among our ‘adventurous’ choices.

Diverse Income is managed by Gervais Williams and Martin Turner. Their strategy is to focus on companies that are displaying signs of productivity growth and they find many of their target companies listed on the Alternative Investment Market, which has not recently been a particularly happy hunting ground.

The duo also run Miton UK MicroCap IT, which we are also placing under performance review, pending a pick up. It, too, has a large slug invested in Aim-listed shares (80% of the portfolio), and continues to struggle at the share price and net asset value level.

Although investing in companies with a market capitalisation of less than £150 million requires a long-term patient approach, investors’ patience is being sorely tested. Since the trust launched in 2015 the shares have gained just 4%, while the NAV is up 14% – compared with an average NAV gain of 41% from other trusts in the AIC UK smaller companies sector.

All three of the aforementioned trusts have something of a ‘value’ style, which entails not overpaying for stocks and waiting for their attractions to be recognised by the wider market.

The same sentiment applies to other Rated Funds that we are placing on performance watch. The Artemis duo, Global Growth and Global Income, have both been Rated Funds since 2014 and have very strong long-term performance records. Both portfolios have relatively high exposure to medium and smaller companies, as well as to those listed in emerging markets and Europe ex UK, and are underweight the US.

The latter, in particular, has held both trusts back in the past 18 months or so but, although we continue to have faith in the strategy adopted by both funds, we will be contacting the managers for an update to ensure we continue to be happy with their approach in relation to their current performance.

In the US equities group, we will be watching Fidelity American Special Situations quite closely. Manager Angel Agudo invests in companies that are undervalued but have strong balance sheets and unrecognised potential. It is notable that the fund has no exposure to heavyweight technology and financial shares that make up the top 10 US stocks by market capitalisation, with the exception of Warren Buffett’s Berkshire Hathaway, which accounts for 6% of the portfolio.

Most, if not all, of the above funds have a distinct bias to value rather than momentum-driven growth. Those characteristics may prove to be very beneficial in the coming months. Nevertheless, we believe their recent performance is grounds for keeping a close eye on them in the months ahead. 

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