Johanna Englundh: Morningstars latest Prospects list for EMEA & Asia has been released and today we’re going to hear more about a couple of the actively managed funds that look promising and might get a Morningstar rating in the future, the reports lead author Jeffrey Schumacher is here with me today, Jeffrey, can you tell us what this report is all about?
Jeffrey Schumacher: The Morningstar Prospect List is a semiannual listing of promising, actively managed strategies that we believe are worth greater investor attention but that are not yet covered by Morningstar’s Manager Research team.
Our Europe- and Asia-based analysts cover around 1,200 actively and passively managed strategies, but in addition we are always monitoring the wider fund universe and look for interesting funds to add to our coverage. The Prospect List presents the 28 funds that we currently have on our radar.
JE: So in this 13th edition of the Prospect List we find two new names. M&G Japan is one of them - What can you tell us about this fund?
JS: This fund is managed by Carl Vine, who took over management of the strategy following his arrival at M&G in 2019. He brings 25 years of investment experience to the fund, but also a team of analysts and two portfolio managers who support him. Part of the attraction here is the access to a boutiquelike structure that is housed within a larger asset-management group. The team employs a differentiated framework to fundamental investing in Japanese equities, seeking out pricing anomalies across the market, built on a proprietary research library dating back to 2001. They construct a reasonably diversified portfolio of approximately 50 names that is style-agnostic and has a bias to mid-caps.
JE: The other addition is T. Rowe Price China Evolution Equity. What makes this an interesting strategy?
JS: We think this strategy is managed by a talented investor. Portfolio manager Wenli Zheng has over 14 years of investment experience and has managed the strategy since its launch in December 2019. While Zheng is relatively short-tenured here, he has built a strong track record on the China component of T. Rowe Price International Small-Cap Equity. We think Zheng is a solid and hands-on China equity investor who knows his portfolio inside out. He is supported by a cast of 14 analysts. While this is a useful resource, the team is still relatively young in terms of its experience and tenure.
A key distinguishing feature is the manager’s preference for small- and mid-cap Chinese firms, which Zheng believes are under researched and therefore contain more alpha opportunities than their large-cap peers. He rules out the top 100 largest companies in China and looks to identify future winners and mispricing opportunities with a market cap below USD 30 billion. Zheng adopts a benchmark-unconstrained, conviction-based approach, and the end portfolio of around 40 names often looks quite different from the MSCI China All Shares Index with an active share of above 90%.
JE: So two new funds to look a bit closer at, thank you so much for joining us today Jeff, and until next time, I’m Johanna Englundh for Morningstar.
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