HEAD-TO-HEAD: Aberdeen Standard versus BNY Mellon

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Investment approach

Both funds focus on large-cap stocks, and have a “quality emphasis”, according to Poole.

However, the Aberdeen Standard Investment (ASI) ostensibly has a value tilt, whereas the BNY Mellon product is unequivocally growth-oriented.

The ASI fund uses the firm’s 140 equity investment professionals who cover around 2,000 companies globally to construct a portfolio of 50 – 80 stocks.

“It is a bottom-up strategy, with quality of balance sheets and value as key considerations,” said Poole.

However, he is concerned that since the merger between Aberdeen and Standard Life in 2017, there has been a “drift towards a growth style”, which is an anxiety shared by Morningstar.

“The fund’s value-emphasis is not as obvious as it was before,” said Poole, who suggested that a switch in focus away from the UK and European markets towards the US might have contributed to a tilt to growth stocks.

There was a significant rise in the portfolio’s price-earnings multiples throughout 2019, which can largely be attributed to an increased allocation to UK stocks.

Indeed, as Morningstar pointed out in a recent note, the fund’s multiple of 24.5 times was well above the 19 times multiple of its benchmark MSCI AC World index in January this year.

Financials comprise about 22% of the portfolio, but it has significant exposure to growth sectors, such as information technology and healthcare.

There is no similar style-drift at the BNY Mellon fund, managed by Walter Scott & Partners.

“There is very clear process and strategy at the fund. It is growth-oriented, with a strict disciplined concentration on mature companies with strong balance sheets, low debt and plenty of free cash flow,” said Poole.

“That rigour means that the fund’s investible universe is stripped down substantially,” he added.

The investment team, comprising three portfolio managers and 40 analysts, screen for companies that can generate at least 20% return on investment during the business cycle, to construct a portfolio made up of 40 – 60 names.

The fund’s biggest sector weights are information technology, healthcare and consumer discretionary, and it is rare that it holds financial stocks because of its growth bias.

“It is a bottom-up approach that captures growth opportunities without sacrificing quality,” said Poole.

Source: FE Fundinfo, Morningstar. (Data in US dollars, 2 April 2020)

Fund characteristics

Country allocation:

Source: Fund factsheets, 29 February 2020

Sector allocation:

Source: Fund factsheets, 29 February 2020

Top 10 holdings:

Source: Fund factsheets, 29 February 2020

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