Schroder’s Taketsume bags AAA rating as trust weathers Japan storm

Schroder Japan (SJG ) manager Masaki Taketsume has weathered the market’s recent crash and extended gains over the index benchmark to win a Citywire AAA rating.

Over three years to date, the £331m portfolio’s focus on value-style stocks, such as industrials, banks and manufacturing has held steady as peers focused on growth companies have seen performance spiral.  

Taketsume has delivered underlying total returns of 28% to the end of October, which beat the Tokyo Stock Exchange index benchmark’s 8% and significantly outperformed the 1.5% decline in its Japanese large and mid-cap trust sector average.

The trust, which said it would pay out 4% of net assets as a dividend annually earlier this year, was ahead of its only value peer CC Japan Income & Growth (CCJI ) given that its return was better relative to the risk. CCJI manager Richard Aston holds an AA rating.

A glance at the large and mid-cap trust sector’s three-year returns makes for painful reading, with the three growth trusts, including Baillie Gifford’s, seeing shares in their preferred tech and healthcare stocks hit hard.

This was exacerbated by August’s massive crash following the rise in Japanese interest rates and the unwinding of the global yen ‘carry trade’. Taketsume took advantage of the cheaper share prices to add to positions and capped losses at 2%, while the index softened 4%.

Deutsche Numis data shows shares in the sector sit 13% below asset value on average at present, with Schroder Japan on a 12% discount and CC Japan Income & Growth on a 10% deficit.

Taketsume told Citywire in September that Japan continued to offer robust corporate fundamentals, improved governance and increased demand from foreign and domestic investors, which would help drive performance. The return of inflation after two decades will also drive earnings growth as many domestic companies regain pricing power for the first time in decades.

Troy managers win AA rating

Personal Assets (PNL ) managers Sebastian Lyon and Charlotte Yonge were bumped up to an AA rating, having just picked up the gong for best global multi-asset trust at the Citywire awards earlier this month.

Under the Troy managers, the £1.6bn wealth preservation trust has delivered total returns of 7% over the last three years, beating the Citywire mixed assets flexible investment sector’s 4% average.

However, their factsheet shows that they remain well behind the UK retail prices index inflation measure’s 25% over the same period, while the FTSE All-Share reference index is up 20%.

In an update this month, the pair said their global portfolio remained cautiously positioned amid rising inflation and growing fiscal concerns in the US and UK, with a duration below three years for government bonds in both countries. 

How the ratings work

Citywire awards managers with a top AAA rating if the three-year risk-adjusted performance of their investment trust is among the very best in their sector.

There are also AA, A and + ratings for managers outperforming their benchmarks by smaller amounts.  

You can find the full list here.

It shows 51 portfolio managers working in 33 investment companies in the UK, Asia, global emerging markets and healthcare, among other areas. Some are well-known, others less so.

The ratings cover 30 equity investment company sectors.

How the ratings are calculated

Our investment trust manager ratings are three-year risk-adjusted measures of the movement in a trust’s net asset value (NAV). They are based on the ‘information ratio’, which is a measure of a fund manager’s skill against a benchmark.

The benchmarks are applied at the trust level, using month-end cum fair NAV. This methodology is consistent with our annual Citywire Investment Trust Awards and our established fund manager ratings.

For a fund manager to be considered for a rating, they need a 36-month track record. Each trust they manage also requires a 36-month track record, unless it aligns with a trust in the same sector and is assigned the same benchmark as an eligible trust.

Any manager who delivers positive risk-adjusted returns across all the eligible investment trusts they manage, against their benchmark, net of fees, over a rolling 36-month period, will receive a rating. To reiterate, we use the NAV of the investment trust to calculate the return rather than its share price.

The top 10% of managers receive an AAA rating.

The next 20% receive an AA rating.

The next 30% receive an A rating.

The remainder receive a + rating.

How to use the ratings

We believe the ratings help investors in their research and identify good investment company fund managers.

To be clear, however, we are not saying an investment company run by a Citywire-rated fund manager is automatically a ‘buy’, or that you should sell an investment company because its manager has lost their Citywire rating.

The Citywire rating simply indicates that a fund manager is generating comparatively good returns for the risk he or she is taking with investors’ money.

Whether you buy shares in the investment company will depend on various factors, such as whether you want the particular market exposure it provides and whether its shares are trading close to the value of the company’s investments or they are on a ‘premium’ above or ‘discount’ below their NAV.

Nevertheless, we firmly believe the Citywire ratings are a vital tool for any investor interested in London-listed investment companies.