First Eagle Amundi International AE-C

Analyst Report
Morningstar's Take
|21/05/2014

by Thomas Lancereau, 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.
Despite high fees, the fund delivers.

Amundi changed the fund’s performance fee calculation for the better in 2011, but its TER remains among the highest in the category. Despite that hurdle, the fund’s positive traits should continue to keep it on track. Fund management is delegated to US-based First Eagle. They take a distinct approach compared to many in the world-allocation category, benchmarking itself to the MSCI World Index. Managers Matthew McLennan, Abhay Deshpande, and Kimball Brooker have kept roughly 80% of the fund in global equities in recent years, with a single-digit-stake in gold bullion and the balance in cash as a part of their capital preservation-based approach.

The fund's 21% cash stake is on high compared to historic levels, indicating that bargains are harder to come by. In 2013, their value hound mentality was on display as they added more hard-hit gold mining stocks including Anglo Ashanti Gold and Barrick Gold. While the fund's cash served as drag compared to its benchmark in the recent equity rally, the fund's heavier skew toward stocks has kept it in better shape than the typical world-allocation rival.

That said, cash has helped the fund outperform in tough times. In 2011, the fund was down 2.2% whereas the group norm slid by 7% and the index lost 5.5%. During the previous manager's watch, it also lost less during the late 2007 to early 2009 downturn. It's a very good sign that the the fund’s form has not been altered since they took over in March 2009. Given that equity markets have mostly rallied since then, it's no surprise that the fund has lagged its benchmark, although it remains well ahead of the category norm and also looks attractive on a risk-adjusted basis.

One caveat to mention is the fund's size. Market conditions have kept the managers focused on opportunities within the large-cap space, but they may not have an easy time investing in smaller-caps once they find them attractively valued. 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
The managers are supported by a solid team of 10 analysts.
ParentNegative
We do not think Amundi considers investors’ interests sufficiently.
ProcessPositive
The cautious strategy aims to preserve capital.
PerformancePositive
More equity focused than most.
PriceNegative
The performance fee calculation has improved, but the fund remains 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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