Manager review
The FS fund is co-managed by Vinay Agarwal and Richard Jones, with the former taking primary responsibility for the strategy.
Agarwal has managed the fund since August 2012, and Jones replaced David Gait starting March 2014.
“Agarwal has indicated that Naren Gorthy, who provides valuable analyst insights, is expected to replace Jones as co-manager sometime in 2016,” said Laidlaw.
Still, “the split has had zero impact on the fund’s investment philosophy,” as the fund adopts a team-based approach, he said.
Prashant Khemka has managed the GS fund’s strategy since its inception in March 2008.
The team is also composed of Aman Batra, Deeresh Pathak, and Abhishek Gupta.
“All members of the team have sector research responsibilities, but, while the research and the decision-making process is very team-oriented, Khemka is ultimately responsible for portfolio decisions,” said Laidlaw.
Fees
The GS fund is more expensive than the FS fund. The former has an ongoing charge of 2.25% versus 1.96% for the FS fund. Median cost of funds in the same category is 2.08% as of 2015.
The difference of fees reached more than 50 basis points last year.
“This is a feature that we don’t like about the Goldman Sachs fund. If you have two managers who perform effectively the same, then 50bps can make a difference,” said Laidlaw.
“Given the size of the fund, we believe the manager is well-placed to share some of its economy of scale with its investors.” Laidlaw noted.
Conclusion
The fee is a key differentiation between the two funds, according to Laidlaw.
“We have strong conviction in both strategies, teams, and investment processes. Both have achieved excellent performance. [The fee] is one area that the Goldman Sachs fund is at a disadvantage to the First State fund on a cost basis.”
But, ultimately it depends on what investors are looking for, he said.
“If they are looking for funds that have a strong quality bias, pay little heed to the index, and really stand out when the market is struggling or in turmoil, then First State should be an ideal pick.”
“If you want more exposure to the small- to mid-cap area, which have performed well over time, then the Goldman Sachs fund might be more appealing.”
