First Eagle Amundi International AE-C

Analyst Report
Morningstar's Take
|04/02/2015

by Mathieu Caquineau, CFA
*  This rating and report were issued for a different share class of this fund. The performance and fee structure of this class may vary from that referenced.
This fund remains a worthy holding in our view.

First Eagle, the firm subadvising this fund, announced in Oct 2014 that comanager Abhay Deshpande resigned. He had been a comanager since March 2009, joining the team in 2000. He worked with Jean-Marie Eveillard, the team leader from 1979 to 2004 and from March 2007 to March 2009, for far longer than comanagers Matthew McLennan and Kimball Booker, who joined the team in 2008 and 2009, respectively. They say Deshpande's departure was amicable and he did not leave for another firm.

The team remains deep. There are 15 analysts, nine of whom have been with the firm for at least five years. But the managers are coping with a huge overall asset base; this fund is close to the USD 8 billion mark and its US counterpart--First Eagle Global--has USD 50 billion in assets. The team has now a limited ability to own significant stakes in smaller-cap stocks. Our concerns are mitigated by the low turnover of the strategy, under 20% annually, and by the fact that transactions are gradual in nature.

The fund’s prudent approach is unchanged. It seeks companies priced cheaply relative to their intrinsic value based on measures such as average earnings over a business cycle and economic moats. Capital preservation is important; the fund often holds a double-digit cash stake, a bit of gold bullion and it will also buy corporate bonds. That part of the portfolio has helped the fund outperform in tough times like 2011. Given that equity markets have mostly rallied since then, it's no surprise that the fund has lagged its benchmark, the MSCI World Index. But on McLennan’s watch, the results are attractive on a risk-adjusted basis against its peers.

We regret, however, that Amundi charges such an unreasonable price for investors to access this fund. The performance fee was improved in 2011 but it is still far from perfect with LIBOR + 400 basis points used as a benchmark. Still, the proven process and consistent results produced by the current team make this a strong choice. It retains our Bronze rating.

Morningstar Analyst Rating™
To find out how Morningstar rates a fund click here.
Portfolio RoleThe fund can be used as a core portfolio holding for exposure to global stocks.
Morningstar Pillars
PeoplePositive
This fund’s longest-tenured manager has left.
ParentNegative
We do not think Amundi considers investors’ interests sufficiently.
ProcessPositive
The cautious strategy aims to preserve capital.
PerformancePositive
The last three years have not been the greatest but this fund has delivered in the longer run.
PriceNegative
The performance fee calculation is better but still imperfect, and the fund remains very expensive.
Morningstar Analyst RatingMorningstar evaluates funds based on five key pillars, which it's analysts believe lead to funds that are most likely to outperform over the long term on a risk-adjusted basis.
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