First Eagle Amundi International AE-C

Analyst Report
Morningstar's Take
|12/09/2012

by Bridget B. Hughes, 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, Amundi International SICAV has other traits that give it appeal.

Amundi changed the fund’s performance fee calculation for the better in 2011, but its TER remains among the highest in the global large-cap blend 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. While that firm has seen considerable change among its investment personnel in the past, many of the 13 managers and analysts have been in place for three years now.

Most important, the distinctive, defensively oriented process hasn’t changed. Managers Matthew McLennan, Abhay Deshpande, and Kimball Brooker seek out companies trading below their estimates of intrinsic value and are willing to buy corporate bonds if they’re a better deal. Capital preservation is a key goal, and the fund will hold significant cash levels and 5%-10% in gold bullion (as a hedge). Recent shifts in the portfolio, including an increase in US stocks and in the technology and financial sectors are typical. Top-five holding Cisco Systems is among the sector’s more out-of-favor names and traded at a price embedding what the managers viewed as a large margin of safety. They like its scale advantage and their long-term horizon allows them to be patient as Cisco tackles challenges. Broad selling among financials triggered purchases such as U.S. Bancorp, with which the team is comfortable thanks to its disciplined loan underwriting and strong balance sheet.

Other characteristics are consistent with the fund’s approach. As of July 31 the fund held 5% in a gold bullion ETF and cash stood at 11%. Performance is also in character. The fund continues to exhibit much lower volatility than the category norm, serving as the ballast that investors have come to expect. During the managers’ nearly four-year tenure, the fund’s 4.6% annualized gain through Aug 30 ranked among the best in the category. (The typical peer shed 0.7% annualized.) The managers’ commitment to the proven process and their security-selection skill earn this fund 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 PillarsPeopleThe managers are supported by a solid team of 10 analysts.ParentWe do not think Amundi considers investors’ interests sufficiently.ProcessThe cautious strategy aims to preserve capital.PerformanceThis prudent approach has led to strong performance.PriceThe 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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