Manager changes get tick

Armstrong Jones' decision to go to a multi-manager style for its international equities fund has received the blessing of ratings house Morningstar.

AJ (soon to be known as ING) recently announced that New York-based Fiduciary Trust will no longer manage 100% of its international shares portfolio. Rather Massachusetts Financial Services (MFS) will take over management of 52.5% of the portfolio, while Oppenheimer Capital will handle the remaining 18.5%.

Morningstar says the move follows "Fiduciary Trust's recent underperformance in international equities."

It says it will keep AJ keep its five star manager, "because AJ’s subcontracted international equities investment managers were selected by a comprehensive initial selection process, and AJ has a high level of service agreements in place to ensure good reporting and monitoring practices."

AJ chief investment officer David McClatchy says the changes will help improve the performance of the company's international funds.

He says that increased market volatility over the past few years has emphasised the impact different money management styles (such as growth, value, large cap, small cap, country, sector) have had.

AJ has been disadvantaged (suffered increased volatility) as Fiduciary is a growth manager with a bias towards large cap stocks. While this has delivered some excellent returns in periods, such as 1999 to mid 2000, it has also contributed to underperformance in more recent times.

"That type of volatility is not the offering we seek to deliver to our clients," McClatchy says.

He says the new multi-manager approach uses three managers with different styles. MFS's style is growth-oriented, with a ‘bottom up’ fundamental research process to identify high-quality stocks, while Oppenheimer is value with a bottom-up approach.

"We still rate Fiduciary very, very highly in their ability to deliver performance going forward," McClatchy says.

He says that despite the changes AJ still believes in its fundamental value proposition of buying mispriced assets with sustainable earnings growth, which is also known as GARP - growth at a reasonable price.

"While AJ’s international equities funds have underperformed in the last 12 months, the new fund structure and investment managers should arrest this," Morningstar says. "Investors in AJ’s funds should see an improvement in performance going forward."