Widely lauded as the Oscars of the fund industry, the Morningstar Awards for Investing Excellence – Hong Kong has announced a list of illustrious winners for 2023 that have excelled themselves over both the short and longer term.
In congratulating the winners, Germaine Share, Director of Manager Research, Asia, points out that with the rigorous vetting in the selection process backed by a global Morningstar research team of 150-strong manager research analysts, the winners represent the industry’s top-notch fund offerings.
“They are investor-friendly funds and firms that have done a sterling job for investors, and that, we believe, should continue to serve them well in the long run, delivering strong risk-adjusted returns,” she adds.
Recognition of the winners
On the winner of the Best Asia Equity Award, FSSA Asian Equity Plus, Share says her team is impressed with their veteran portfolio manager, Martin Lau, who leads a tight-knit team of 20 investment professionals. “Their strategy’s thorough, bottom-up research process aims to identify quality growth companies at reasonable valuations, and has resulted in superior risk-adjusted returns over multiple market cycles as well as impressive downside protection, which was evident in 2022,” she observes.
The same team at FSSA China Growth has won the firm the Best China Equity Award. Share notes that the team focuses on long-term investing and has a strong alignment of interest with investors. “The strategy’s quality-growth investment approach pays particular attention to management quality and absolute returns, which has equipped it with strong downside resilience, as seen in the bear markets of 2018, 2021 and 2022,” she adds.
Share notes that PIMCO GIS Global Bond, winner of the Best Global & Asian Bond Fund award, is led by Andrew Balls, and backed by veteran co-managers Sachin Gupta and Lorenzo Pagani, drawing on the firm’s extensive resources. “Their process is differentiated from peers via its considerable flexibility, and the portfolio has tended to stay on the shorter side of the benchmark’s duration, which helped during recent periods of interest rate shocks,” she comments.
At Schroder ISF Global Sustainable Growth Fund, winner of the Best Global Equity Fund Award, the duo co-manager of Charles Somers and Scott MacLennan is part of the six-strong team that effectively leverages comprehensive supporting resources. “The strategy’s well-established process targets quality growth companies demonstrating positive sustainability characteristics, and its multilayered structure has supported an impressive track record that has kept volatility in check,” Share notes.
Capital Group, winner of the Best Asset Manager Award, impresses the Morningstar team with its proven ability to address areas of weakness and invest in prudent growth opportunities, as well as its signature multimanager approach to investing which minimizes key-person risk and succession issues. “The Group has continued to deliver strong risk-adjusted results for investors, low fees, and managers that invest alongside shareholders at industry-leading levels,” Share concludes.
Echoing management’s ambition to become a sustainability leader, BNP Paribas has emerged as the winner of the Best Asset Manager – Sustainable Investing Award. The firm has deployed innovative quantitative tools to assess portfolio’s alignment to sustainability frameworks, and management has heavily invested in the firm’s sustainability center. Share highlights the fact that the firm’s active ownership policy is wide-ranging, thoughtful and well-coordinated. “Its internal proxy-voting system is a key strength, which allows it to seamlessly cast and report on its votes at shareholder meetings in line with its ESG principles,” she adds.
2022: a historic year
In reviewing last year’s fund market, Bryan Cheung, Associate Director, Manager Research, says it has been a particularly difficult year. “Merely preserving capital was a challenge, let alone making a profit,” he notes. “There was nowhere to hide for investors, as stocks and bonds both fell steeply. .”
Looking at the overall picture, Cheung points out that investors have become short-sighted in face of the bear market, and there has been an increased outflow of funds, with the global open-ended fund market (excluding ETFs) suffering anoutflow of US$1.3 trillion, and the global fixed income funds US$500 billion. But in reverse, ESG funds have witnessed an inflow of US$180 billion. “We’ve seen a structural growth for ESG funds,” he remarks. “But investors should beware of ‘green washing’ risk as some of these funds are in name only.”
Lessons learned
Cheung reminds investors to “respect” the unpredictability in markets and the force of mean reversion whereby asset price volatility and historical returns tend to eventually revert to the long-term average levels. Therefore, they should pay attention to valuations and fundamentals. “In the year ahead, it is advisable to tone down expectations and adopt a more realistic outlook,” he cautions.
Cheung points out that it is very difficult to predict short-term market movements or time its rise and fall. “It seems to be always coming up with surprises,” he remarks. Investors should, therefore, prepare for different outcomes and be mindful of where extreme pessimism or optimism exists in markets. He quotes the China market as an example: Once labeled ‘uninvestable’ last year, it has rebounded sharply since November 2022 through February 2023.
Risk management is essential in a volatile market, Cheung stresses. “This is often overlooked when the market is hot,” he explains. “Investors must limit their potential risks by setting a margin of safety; and they must always maintain a diversified portfolio with a balance between shares and bonds.”
Cheung recommends investors to stay invested using a portfolio approach to minimize irrational decisions and achieve a better return in the long term. “People go on a shopping spree when a sale is on, but investors tend to behave in the opposite manner in the investment market,” Cheung observes. “One should always bear in mind that the market is forward-looking and tends to trend upwards in the long run.”
Morningstar Awards for Investing Excellence 2023 winners
Morningstar Category Awards
Best Global Equity Fund, Winner: Schroder ISF Global Sustainable Growth A Acc USD
Best Asia Equity Fund, Winner: FSSA Asian Equity Plus Class I USD Acc
Best China Equity Fund, Winner: FSSA China Growth Class I USD Acc
Best Global & Asian Bond Fund, Winner: PIMCO GIS Global Bond E USD Acc
Best Asset Manager, Winner: Capital Group
Best Asset Manager – Sustainable Investing, Winner: BNP Paribas Asset Management
