Liontrust and Buffettology funds axed from II buy list following Morningstar makeover

Five funds, including two placed under review, ejected in Super 60 restructure

Keith Ashworth-Lord, chief investment officer at Sanford DeLand


The Liontrust Special Situations and Sanford Deland Buffettology funds are among the casualties of Morningstar’s overhaul of Interactive Investor’s Super 60 buy list.

Morningstar wasted no time giving five funds the boot after assuming control of II’s fund research, which underpins selection for its main buy list and ethical sister list ACE 40.

Liontrust Special Situations fund and SDL Buffettology were both ejected by Morningstar due to size concerns.

The former, which is managed by Anthony Cross and Julian Fosh, has close to £6bn in assets, making it one of the largest UK equity funds on the market.

But because of its dedicated allocation to mid and small-cap companies, its size becomes a hindrance, Morningstar said, forcing the managers to choose between having high ownership of a company or owning smaller portions of more companies.

“We feel that this means the managers cannot fully express the fund’s investment process and that they may end up owning companies in which they have lower conviction just to spread the money,” it said.

Meanwhile Morningstar expressed concerns about the size of the assets being accumulated by SDL Buffettology. It noted the fund has swelled quickly in three years to £1.6bn off the back of strong inflows. However, judging from the fund’s liquidity profile, if inflows continue the strategy could run into problems or Ashworth-Lord would have to change how the fund is run, it added.

“We recognise that the strategy has delivered very strong performance but due to the possible risks or uncertainties we have lost confidence that this return profile can be replicated in the future.”

JP Morgan European Income Trust gets the chop while Pease is spared

SDL Buffettology was placed under review by II last year, alongside the JP Morgan European Income Trust and Crux European Special Situations fund.

The JP Morgan fund was also culled in the recent overhaul, due to its planned merger with the JPM European Growth Trust, but Richard Pease’s £797.3m European equities fund was spared.

Morningstar said while Pease had endured an unusual bout of poor relative performance due to several “stock-specific disappointments,” it was willing to overlook this, believing his knack for finding companies with high ROCE, strong free cash flow generation, and low cyclicality would win out in the long-term.

The research house also removed Martin Currie Japan Equity from II’s buy list and the Marlborough Global Bond fund, following the pending retirement of longstanding manager Geoff Hitchin.

See also: II praised for sticking to its knitting as it outsources buy list research

Replacement funds

Morningstar also revealed the six funds it had lined up to replace the fallen Super 60 funds.

Ninety One UK Alpha will replace Cross and Fosh’s Liontrust Special Situations fund. Though Morningstar said it had been “disappointed” by the recent returns, it said the fund benefits from a strong and experienced team, led by manager Simon Brazier, and represents a “strong option for broad exposure to UK equities”.

Ben Whitmore’s value contrarian Jupiter Special Situations fund steps up to replace SDL UK Buffettology, while Blackrock Continental European Income and Pimco Global Investment Grade Credit stand in for the JP Morgan and Marlborough funds, respectively.

Additionally, Morningstar said it had re-categorised the Lindsell Train Japanese Equity fund from ‘core’ to ‘adventurous,’ to fill the spot of Martin Currie Japan Equity, and added Jupiter Japan Income as a ‘core’ choice.

II Super 60 chops and changes

Original Replacement
Liontrust UK Special Situations Jupiter Special Situations
SDL UK Buffettology Ninety One UK Alpha
JP Morgan European Income Trust Blackrock Continental European Income
Martin Currie Japan Equity Lindsell Train Japanese Equity (re-categorised)
Marlborough Global Bond Pimco Global Investment Grade Credit
Source: II

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