Hello and welcome to the Morningstar series, 'Ask the Expert.' I'm Emma Wall and here with
me today is Szymon Idzikowski, Morningstar closed end fund analyst. Hello Szymon.
Hi Emma.
So, I thought today we could highlight three investment trusts to watch in 2015. What's
your first investment trust?
Well, the first investment trust I think is worth watching is Montanaro European Smaller
Companies Fund (MTE). It's a fund we rate Silver. It's a fund with a very strong long-term
track record but one that struggled a little bit over the last couple of years and actually
both in 2013 and in 2014 actually the reasons have been quite similar. We saw a number of
rotations. We saw companies with emerging market exposure underperforming domestic players.
We saw growth underperforming value, quality underperforming low quality. So, these were
some of the features that potentially held the fund back. But looking at the history,
these things happened before. This rotation has happened before and subsequently each
time the fund bounced back proving that the process has merit and indeed it's a process
that keep in high regards. It's tried and tested. It's an experienced team. It's a well-resourced
team. And the fund currently trades at a discount – which is why there – than its long-term
average, which provides an attractive entry point.
On Europe, of course, there is a lot of political clout behind the region making sure that they
really come out of this recovery which of course will support stock market.
Exactly. We saw a recovery in U.S. We saw a recovery to some extent in U.K. Europe is
lagging somewhat, but I'm sure that's going to be the next market.
What's the second fund today?
So, another fund I think is worth watching is Temple Bar (TMPL). It's a Gold-rated fund
run by Alastair Mundy. He predominantly invests in U.K. large cap names and he looks for cheap
companies that are out of favor but that have good a balance sheet that allows them to go
through those difficult times. So, it's a contrarian long-term approach and again, one
that likely to beat last year. The fund holds some (gold). There were some names such as
Tesco that didn't work out last year but these are the names we would actually expect a value
investor to hold. And again, if you are an U.K. investor or if you're an investor who
keep doing for U.K. exposure given this year there will be an election in the U.K., potentially
the government will have minority, there will be some political uncertainty, I think the
benefit of this fund is that historically it proved it can actually protect on the downside,
so potentially one to hold in a more choppy market.
Considering even in a plateauing market like we've had over the last 12 months, as you
say, looking for that type of investor who really is thorough and goes underneath to
look for contrarian bets, they are going to do better than someone who just matches the
market?
Yes, exactly.
What's the third fund?
So, the third one is Murray International (MYI). It's a fund run by Aberdeen's global
equity team. It is a fund that does invest actually in a global equity, large cap names
and again, one with a great long track record that last year – actually last two years
it's struggled a little bit and again, similar story where quality names underperformed low
quality. But we've got again a very experienced team behind it and a strong track record.
Actually, another maybe point about this fund, another thing that held it back is its structural
underweight to the U.S. and to Japan and overweight to emerging markets which all three were again
held it back. But given potentially how far the U.S. valuations went, how stretched they
are, again…
This is the year to be underweight in the U.S.?
It could be the one, yes.
Thank you very much, Szymon.
Thank you.
This is Emma Wall for Morningstar. Thank you for watching.