Morningstar has announced the winners of its annual Pan-European Awards for investing excellence. The three victors have been announced this week, with Philippe Igigabel (HSBC Gif Euro High Yield Bond) taking the title of Best Manager, Lorenzo Pagani (Pimco Gis Euro bond) winning in the Rising Talent category, and Baillie Gifford named as best investment group.
The annual awards looks at a European level to portfolio managers and investment houses which demonstrate excellent management skills, the ability to go against the grain for the benefit of savers, and alignment with the interests of investors.
The recognition is based on the qualitative assessment system of the funds, the Analyst rating, which is a forward-looking) on the ability of a strategy to beat in the future not only the average of its competitors, but also its reference benchmark, net of costs, also taking into account the risks assumed. It is awarded at the end of a lengthy process of analysis conducted by the team of analysts that focuses on three pillars that play a key role in the success of the funds: people, process, and society.
Best Manager: Philippe Igigabel
Philippe Igigabel has around 20 years of investment experience. He began his career as a portfolio manager as co-manager of HSBC GIF Euro High Yield Bond in 2000 before becoming its leader in 2003. He has been dealing with European high yield bonds since the late 1990s, and is therefore one of the most experienced portfolio managers according to Morningstar analysts.
HSBC GIF Euro High Yield has a Morningstar Analyst Rating of Gold in the cheapest classes. Igigabel has never shifted from his high conviction approach and guided by evaluations. For example, he did not hesitate to gradually reduce risk in periods he believed were characterised by market excesses. Instead, he systematically took advantage of declines in valuations to buy names he believed had solid fundamentals. Igigabel's selectivity is also a hallmark of its approach.
Typically only 10-30% of the high yield bonds issued each year meet its stringent quality criteria. Thanks to this disciplined process, the fund has had an exceptional track record , both on an absolute and risk-adjusted basis. It also largely avoided issuers who went into default, reflecting the quality of the selection of the underlying stocks and the fundamental analysis carried out by the expert team of European credit analysts.
Emerging Talent: Lorenzo Pagani
Lorenzo Pagani was head of the European rates team and chairman of the European Portfolio Committee at Pimco before taking on the role of lead portfolio manager of the Pimco GIS Euro Bond fund in early 2017 (having been co-manager alongside Andrew Balls since 2014).
Pimco GIS Euro Bond has a Morningstar Analyst Rating of Silver for its institutional class. Pagani has done very well so far, leveraging Pimco's extensive credit research resources. The fund looks to a wider universe than most competitors, sometimes investing in non-euro denominated debt, emerging market bonds, asset-backed securitiesand currencies.
In particular, securitised debt exposures have been beneficial to the strategy over the past three years. While these elements may increase risks, as well as expected performance, Pagani and his team have so far made good use of them. The broad portfolio diversification also ensures that no single investment decision has a disproportionate impact on overall performance.
Best Company: Baillie Gifford
Baillie Gifford, founded in 1908 and headquartered in Edinburgh, is owned by around 40 partners, each with an average of over 20 years experience. It has strategies across all asset classes, although equity remains its strong point and continues to dominate in terms of assets under management.
Baillie Gifford's clientele is mainly institutional, but in recent years the company has also gone into the retail channel. In addition to being one of the largest managers of listed closed-end funds in the UK, it has expanded its international presence over the past decade through a range of open-ended funds spread across Europe and the US. A positive consequence of the large weight of institutional clients, of closed products and of being controlled by few shareholders, is the long-term investment approach. This is further reinforced by the remuneration structure, in which a large component of the managers' bonus is based on three- and five-year performance.
While there are small, focused investment teams within the company, there is a strong culture of collaboration and turnoverof staff is among the lowest in the industry. In addition, the company has been active in reducing commissions on a number of strategies in recent years and has demonstrated a willingness to safeguard investor capital by limiting entry into those funds approaching maximum capacity. Overall, we believe Baillie Gifford benefits from a strong investment culture.
