abrdnI-Nrth American Sml Comp A Acc USD |
by Eric Schultz
Many recent disruptive personnel changes warrant downgrading abrdn North American Smaller Companies' People Rating to Below Average from Average. As a result, the Morningstar Medalist Rating on its most expensive share classes falls to Negative from Neutral; cheaper ones remain Neutral. The strategy lost all three of its managers in the last year. In June 2022, longtime comanager Jason Kotik left suddenly for a competitor. Then in November of that year, lead manager Ralph Bassett unexpectedly left the industry after 14 years at the helm here. Following these departures, Tim Skiendzielewski stepped into the breach. He had been a comanager on the strategy for several years but lacked lead manager experience as Bassett made all investment decisions during his tenure. In June 2023, Skiendzielewski left to rejoin Kotik at his new firm. Manager Christopher Colarik will now take over, though he is new to the firm and this team. He joined in March 2023 intending to comanage alongside Skiendzielewski. He brings ample small-cap investing experience, most recently at Glenmede Investment Management, where he posted solid results as a comanager on small-blend Glenmede Small Cap Equity GTCSX from 2001 to 2022. Colarik intends to implement the same approach used by Bassett and Skiendzielewski. They looked for stable and understandable businesses with predictable cash flows and a history of profitability. Strong balance sheets and opportunities for profitable growth were also key. This focus on strong businesses came through in the portfolio. Efficiency metrics such as return on equity, return on assets, and net margins typically trended higher than small-growth Morningstar Category peers and the Russell 2000 Index primary prospectus benchmark. The portfolio also typically had a higher proportion of businesses with wide or narrow Morningstar Economic Moat Ratings. However, Colarik’s ability to successfully execute here is uncertain. Amid the management shakeups, the support team shrunk from 10 analysts as of year-end 2022 to just two as analysts left the firm or were assigned to other strategies. Furthermore, there are gaps in financials and technology sector coverage, which together account for about 35% of portfolio assets as of April 2023. Colarik plans to cover these consequential sectors until a permanent analyst is hired. The strategy must stabilize before it merits investors’ consideration. |
Morningstar Pillars | |
People | Below Average |
Parent | Average |
Process | Average |
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