The underperformance of active global equity managers last year was down to entirely “reasonable” concerns about US valuations, says Morningstar.
In its Global Equities Sector Wrap-up, Morningstar said the rising US dollar was among several themes that detracted from the relative performance of many active managers in 2014.
However, the underwhelming performance of active managers has some “reasonable, fundamental” explanations, according to the report.
“For example, valuation-related concerns attributable to unprecedented central bank stimulus spurred many managers to have underweight exposure to the US, a market which continued to outperform in 2014,” Morningstar said.
“Underperformance related to such circumspection is not necessarily a bad thing. Besides, some of our highest-rated managers, including Magellan Global and Platinum International, still boast impressive track records over the course of a market cycle.”
Morningstar has upgraded five global equities investment strategies from silver to gold, including Magellan Global. This was because Morningstar became more confident about the firm’s ability to manage a growing team and its significant growth in funds under management, according to the report.
Meanwhile, BT Asian Share was upgraded from neutral to bronze, thanks to new manager JO Hambro Capital Management, and Vanguard International Small Companies went from neutral to bronze, as a gradual increase in assets has helped the strategy move toward full replication, Morningstar said.
Hunter Hall Global Value and Hunter Value Growth were upgraded from negative to neutral in recognition of the firm’s efforts to stabilise the business, the report said.
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