S&P Fund Services analyst, Justine Gorman said: “Risk-on and risk-off behaviour has been one of the most dramatic developments in global markets since the start of the financial crisis. High correlations are dominating and are at similar levels seen immediately after the Lehman Bros. collapse.

“The mood of the markets oscillates between optimism and pessimism, and the now synchronised markets move as one. Assets are now characterised either ‘risky’ or ‘safe haven’, they have lost a great deal of their fundamental identity.”

“It is therefore not surprising that during the recent volatile market environment S&P found that many global equity managers opted to invest in blue chip companies with strong cash flows that can be objectively valued,” said Ms Gorman.

Key themes of the report are:

• Despite the worsening economic conditions in advanced economies, Asia remains a bright spot in a low-growth world. Underpinned by resilient domestic demand and strong growth in intra-Asia trade, Asian economies are less dependent on OECD countries than in the past. While Asia’s emerging economies account for 30 percent of global GDP, they contributed close to 60 percent of global growth in 2011 and are expected to do the same in 2012.
• Until recently, the typical global equity manager had considered an exposure of about 8% in Asia to be a neutral allocation, because it accords with the weighting on a market capitalisation basis within the MSCI index. This creates structural market inefficiency as the Asian economies comprise about 30% of the global economy—which logic would dictate is a much better starting point for the determination of a neutral position.
• Fund managers are beginning to make the global structural shift in their portfolios. Many managers are optimistic on China, seeing valuation opportunities in Chinese equities and are generally buying in to the “soft landing” scenario. Other markets of interest include Korea, followed by Hong Kong, where managers can gain access to the Chinese market indirectly.

 1 August 2012

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Four managers are rated four stars in this release, and are considered to offer the strongest capabilities in the sector. The managers are Aberdeen Asset Management, Altrinsic Global Advisors, Vanguard Funds, and AllianceBernstein (distributed through AXA/AMP).

• The Aberdeen global equity team is supported by a large global network of regional equity analysts who help distil the investment universe into a manageable number of potential investment opportunities. S&P believes that there is a mix of experience and depth of coverage across the regions. The manager implements a pragmatic and logical investment philosophy and process resulting in a benchmark-unaware, relatively high-conviction portfolio of between 40–60 stocks.
• Altrinsic Global Advisors is an all-cap, value-focused global equities manager that is majority owned by its employees, with nabInvest holding a minority stake. Altrinsic’s less-constrained style of investing has enabled it to navigate various market environments, while still delivering downside protection for investors. At the same time, the manager’s go-anywhere investment approach hasn’t insulated investors from the periods less conducive to value-style managers in general.
• Vanguard’s index-investment approach seeks to deliver investment returns that closely match the index. For its global equities large-cap strategy, Vanguard adopts a full or close-to-full-index replication approach. It continues to implement this investment approach in a disciplined and risk-controlled way, successfully adding incremental value through the efficient management of cash flows and index changes.
• AllianceBernstein’s value equities team, the underlying manager of the AXA Global Equity Value Fund, displays an unwavering commitment to the “value” investment style that results in a disciplined “true-to-label” value offering. Despite the staff changes over recent years, its investment team still remains one of the best resourced in the industry.

“Many global equity managers are concerned about the market recovery running out of steam and have steered their funds toward defensive blue-chip companies, many with a large allocation to Asian markets,” said S&P fund analyst, Justine Gorman.

There was a high degree of disparity in performance among major share markets in 2011, with all major equity markets losing value. Emerging markets experienced larger losses than most developed markets over the course of the year, which was heavily influenced by commodity price trends and the outlook for China. With the Australian dollar opening and closing the year at around the U.S. 102 cents level, there was minimal difference in returns between hedged and unhedged MSCI World Indices.

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Mr Lowenstein had been with Hunter Hall for 14 years, and has over 25 years’ investment experience. He was considered a key team member. He managed approximately one fifth of Hunter Hall’s firm-wide assets under management, and made an important contribution to its portfolios. 

“S&P will meet with Hunter Hall next week, and seek to understand how Mr Lowenstein’s investments will be managed, before reviewing the ‘On Hold’ ratings,” said Justine Gorman, analyst at S&P Fund Services.

The funds affected by this announcement are:

• Hunter Hall Australian Value Trust
• Hunter Hall Global Ethical Trust
• Hunter Hall Global Deep Green Trust
• Hunter Hall Global Ethical Trust Hedged
• Hunter Hall Asian Value Trust
• Hunter Hall Value Growth Trust

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