Introducing the Morningstar Awards 2013

Christine St Anne  |  07/02/2013Text size  Decrease  Increase  |  
Christine St Anne: It's certainly awards season with the Oscars coming up. But Morningstar also has its awards for the investment management industry. Today, I'm joined by Tim Murphy to give us a little insight into the Morningstar Awards 2013.Tim, welcome.

Tim Murphy: Thanks, Christine.

St Anne: Tim, what sort of award categories do we have?

Murphy: So there's a range of awards. The bulk of the awards are in individual asset classes. So, large-cap Australian equities, fixed interest, listed property, multi-sector. So, we look at range of factors within each of those asset classes. But then we have two awards that are slightly different to that.
The first of which is the Emerging Manager of the Year award, where we look at capabilities or funds that are new; less than three years old that we think have a strong chance of becoming future good performers and future winners of individual asset class categories. And if you look through the finalists for our awards, you see there're actually a number of former winners and finalists of the Emerging Manager of the Year award; so we think it's quite a good sign of up and comers to keep an eye on.

And then finally, we have our overall Fund Manager of the Year, who is the manager that has demonstrated the best performance across a number of capabilities rather than just any one particular asset class; so the best sort of overall all-rounder, if you like.

St Anne: Can you give us further insights into the processes behind the nominations?

Murphy: Sure. So, while that's an annual award, we look at more than just annual performance for the last 12 months. Clearly, the fund manager needs to have done well in the last year, but equally too, we like longevity for these things. So, there's three key criteria we look at is obviously performance last year.

Secondly, performance over the longer term as well; so not only has the manager done well last year, but have they done well consistently for clients over a long period of time. And thirdly, we factor in the Morningstar research team's analyst writing into the picture as well. So, we want to be focusing on managers who have done well in the past, but who also we think have a good chance of continuing to perform well into the future. So, a combination of those three factors within each of the asset class and overall categories determines the winner there.

The one exception to that is the Emerging Manager of the Year Award. Obviously, given that it is a bunch of managers that are newer to market there tends to be a more qualitative discussion amongst the Morningstar fund research team based on the managers that we've seen that are fairly new or throw around some ideas and then vote on those accordingly to determine first of all the finalists and then the ultimate winner.

St. Anne: Tim, did you pick up any trends when making the nomination list?

Murphy: So, it really depend on the asset classes. So, I think, there's a few managers nominated the sheet that we haven't seen for quite a few years. There is a couple of new ones and additionally there is a couple that have been consistently up there in the last couple of years as well. So, it's hard to define a trend across the board because it really does vary depending on the particular award or asset class and what's going on at that level. So, a combination of the old, the new and the consistent through time, a combination of boutiques and institutional names, so a good spread way to think across the various categories.

St. Anne: It's been a few challenging years for the managed funds industry. Tim, why do you think investors should keep their faith in professional managers?

Murphy: Well, I think professional managers can add a lot of value and certainly the (funnel through) awards are good examples of that in all cases. People haven't been putting money into the market in recent years because there has been a bit of fear out there. Term deposit, cash rates have been quite high. So, it's been easy to stay in the safe option and getting 5 per cent, 6 per cent in terms deposits. But going forward, interest rates have come down quite materially.

Investors are starting to realise that, hey, market after last year, equity markets up around 20 per cent, listed property is up 30 per cent, interest rates – cash rates now sort of down around the 3 per cent mark, getting more into markets and then having someone professionally manage that in a managed fund context can certainly add a lot of value.

St. Anne: Tim, thanks much for your time today.

Murphy: Thanks Christine.

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