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.