Man Jpn CoreAlpha Eq D G Q EUR Dist |
Morningstar's Take
|17/12/2024by Daniel Haydon
| Man Group has announced that long-term chief executive Luke Ellis will retire on Sept. 1, 2023. This is to ensure an orderly transition and oversight of the firm's 2023 interim results. Ellis joined Man Group in 2010, having previously been chair of GLG's multimanager activities and a managing director of Man FRM between 1998 and 2008. Current president Robyn Grew will take over as CEO. Grew will relocate from the US to the UK following her appointment in September, but will continue to spend a substantial proportion of her time in the US. Since joining Man Group, Grew has held several senior roles, including group chief operating officer, head of ESG and general counsel, and also oversaw the reorganization of the group's corporate structure in 2019. We see Grew's appointment as a natural succession and the fact that an internal candidate was appointed to the role reflects the ability of the team that Ellis developed around Ellis. Given Grew's substantial involvement as president of Man Group, we don’t think this change has a material impact on Parent Pillar rating. As such, the Morningstar Parent Pillar rating remains Average. |
| Man Japan CoreAlpha benefits from a well-structured, contrarian value investment process and the continuity provided by veteran portfolio manager Jeff Atherton and the cohesive team he leads. The People and Process Pillar ratings of Above Average are maintained. Since Atherton took over as the lead portfolio manager in January 2021, some important process enhancements have been applied to good effect. There is a greater appreciation of the catalysts that help drive rerating, including metrics such as return on equity and earnings quality, as well as the corporate governance improvements that have been a hugely important facet of the Japan equity market in recent years. These changes are essentially a formalized way of assessing risk to help avoid value traps. We see this as a well-reasoned evolution, without affecting the contrarian, deep-value philosophy that has long differentiated the fund from peers. A modest reduction in position sizes and a slightly more diversified portfolio are hallmarks of the approach. The introduction in early 2024 of a more explicit consideration of management quality is also viewed positively. Recent portfolio activity evidences the contrarian-value philosophy. The fund took some profits from financials after a strong run and increased exposure to domestically oriented companies, real estate, and auto companies. This has resulted in a slight decrease in the large-cap value exposure—though not beyond expectations—and the addition of some fallen growth angels, such as Nidec and Fanuc. Elsewhere, we recognize the continued personal growth of team members and the cohesive culture that Atherton has cultivated. This York-based team works well together and benefits from Atherton’s lengthy experience, which spans multiple investment cycles. Both Emily Badger and Stephen Harget were promoted to portfolio managers in January 2023, reflecting their increased contributions to the strategy. Meanwhile, the addition of a new analyst Ridwan Uddin in September 2024 is a positive too, following a successful spell with the team as part of the graduate scheme. The fund has performed very strongly in the period since Atherton's appointment in January 2021, which has coincided with a strong recovery in value in Japan. It ranks very highly within its category over this period. As one would expect, strong performance has led to increased turnover in the fund’s holdings as Atherton has sought to replace those positions that have become fully valued. We note that before Atherton took the lead, the fund endured a period of severe style-related underperformance that serves to highlight the deep-value nature of the strategy: Returns can be expected to diverge significantly from the benchmark, and investors are encouraged to take a long-term view. |
Contrarian value from a well-regarded team.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | Above Average |
| Parent | Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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