HEAD-TO-HEAD: Barings versus Merian

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PERFORMANCE

Nick Williams, lead manager of the Barings fund, has enjoyed an excellent track record, driving the strategy well ahead of its peers in the Europe (ex-UK) small/mid-cap equity category, according to McDermott.

The Barings Europe Select Trust Fund has generated an 11.66% three-year cumulative return in US dollar terms, compared with 5.62% by its sector average, according to FE Fundinfo data.

Over five years, it has posted 49.20%, versus 33.41% by its peers.

“The strong return has been combined with keeping volatility in check, which is significantly lower than its benchmark’s,” he said.

Moreover, “in downward markets, the quality bias has tended to help protect investors’ capital better than most peers,” said McDermott.

This was demonstrated in 2014, when a modestly positive return was delivered, while its average peer and index were in the red.

In the fourth quarter of 2018, when the market sold off heavily, returns were in line with the index, and over the volatile calendar year the strategy had a top-decile finish in its category. The sell-off in the first quarter 2020 again saw the strategy’s resilience shine through.

“The fund’s performance has also kept up with rising markets in recent years, and stock selection has been key to adding value over time,” said McDermott.

Turning to the Merian fund, following a strong start from launch in late 2014, two poor years in 2017 and 2018 undermined the track record.

Its three-year cumulative return -7.80% in US dollar terms, according to FE Fundinfo, although over five years performance has been much healthier, at 49.27%.

In 2015, the manager’s stock picks in the industrials sector helped returns, and the fund then enjoyed an excellent year in 2016, comfortably outperforming the benchmark, the category index, and the category average, with strong stock selection across a number of sectors.

However, 2017 and 2018 were disappointing relative to those yardsticks.

Stock selection in areas such as consumer discretionary and industrials detracted from relative returns, as the manager held on to certain positions for too long in the face of adverse news flow, according to Morningstar research report.

Following a review and some tweaks to his process implementation, relative returns improved in 2019.

Value stocks significantly underperformed growth stocks in the first quarter of this year, which was a headwind for Merian strategy given its more balanced approach compared with its more growth-orientated category.

Discrete calendar year performance

Source: FE Fundinfo. Returns in US dollars. (*12 November 2020)

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