HEAD-TO-HEAD: MFS versus Robeco

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Investment approach

The MFS and the Robeco funds both invest in large-cap US equities. Both products are also valuation-conscious, but there are differences in their investment processes, according to Wolfstetter.

She explained that the MFS fund has a focus on quality. Its fund managers prefer stable companies with a sustainable return-on-equity (ROE) and free cash flow, as well as solid balance sheets and durable franchises.

“Valuation is an important consideration, but they prefer to purchase industry-leading firms when they’re out of favour rather than poorly run firms trading at fire-sale prices,” she said.

Turning to the Robeco fund, Wolfstetter said that it is more valuation conscious than the MFS fund.

“It aims to identify a catalyst that will unlock a company’s value, whether a new product, management change or restructuring,” she said.

According to her, the Robeco fund’s team makes use of a 13-factor quantitative model in which value-oriented factors, such as price-to-free cash flow and enterprise value-to-ebitda account for 40% of the model’s weighting, while momentum indicators, such as sales and earnings revisions, account for 40%. The remaining 20% is for “signs of healthy fundamentals”, such as a robust ROE.

“[The model] is centred on companies with an attractive relative valuation, positive momentum and sound business fundamentals,” she said.

Given the momentum component of the Robeco fund, its turnover is higher than the MFS fund.

The turnover of the Robeco fund is 44%-65% annually. The MFS fund turnover is around 15%, according to Wolfstetter.

She also cited differences in the portfolios of the two products.

“The MFS Value has a higher exposure to defensive sectors. It has maintained a clear quality tilt relative to the Russell 1000 Value Index, evidenced by its higher profitability metrics such as ROE and return on invested capital,” Wolfstetter added.

Sector allocation (%)

Source: Morningstar

Top 10 holdings

Source: *Morningstar, as of 31 December 2019. **Fund factsheet, as of 31 January 2020

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