Report Release Date: 8 Jul 2010
Analyst: Jackie Beard
Morningstar Opinion
Baring Global Emerging Markets has garnered our confidence.
Manager James Syme took over the fund in Dec. 2006 so he now has well over three years’ track record under his belt. It helps that he’s using the same process that’s been in place since 1996, so although his own tenure is relatively short, that of the process is much longer. Performance over both the long and short term is good, with Syme achieving an annualised return of 6.95% to the end of June (in euros), some 4.5 percentage points more than his category peers over his tenure. As important for long-standing fundholders, the track record since 1996 is also strong.
Much of this can be credited to the process, which starts by analysing countries according to five factors: growth, liquidity, currency, management, and valuation. The team then weights each factor’s importance in each country to produce a grade between 1 and 5. Syme can buy stocks only in countries weighted 1 and 2, but it’s not just about getting the right country weights. Stock selection is equally important and companies are screened first for liquidity, which cuts the universe down to around 600 names. These are then assessed using the same criteria and the aim is to successfully blend the top-down calls with the best bottom-up stock ideas.
Performance since this process was introduced shows its success, but it's necessary that the right people be in charge to execute it well. Indeed this is where there has been turnover in the past, but with Syme coming on board in 2006, we think things have settled down. He’s joined at the helm by comanager Paul Wimborne, and in January this year they appointed a third manager, Mark Julio, from the Latin American team, to help out with client servicing and the management of segregated mandates. It’s a tight trio that, after observing for a period, we believe works well together and has brought stability back to investors. All three have significant experience in emerging-markets equities, and both Syme and Wimborne ran funds in their previous roles—Syme at SGAM and Wimborne at Insight. In addition, they are backed by a team numbering more than 20 based globally and, in recognition of Baring’s commitment to this asset class, they have bolstered analyst numbers in both Latin America and India in the last year, including a new head of LatAm.
Syme’s prior record at SGAM was lacklustre, which was one of our concerns previously, but we think he has strong support here and has now shown an ability to apply the proven process with skill over a meaningful period. One caveat, though, is the fund’s TER, which is a bit higher than the category median. While not extreme, given the size of assets the firm runs, both in emerging markets and generally, we think it could pass on some economies of scale. That said, our conviction has increased and we have upgraded this fund's rating to Superior.
*The above returns are in EUR terms.
To learn more about the fund, please click here.
To read the summary report, please click here.
