Report Release Date: 18 Aug 2010
Analyst: Maximilian Kreitlmeier
Morningstar Opinion
RCM Global Equity is falling further and further behind.
The Global High Alpha strategy used here was able to yield good results from Sept. 2004 to the end of Oct. 2007 (see analysis of RCM Interglobal). Since 2006, this approach has also been used at RCM Global Equity. However, in 2008 Global Equity's return was only good enough compared with other funds focused on high-quality stocks to rank in the second half of the comparison group, due to a painful loss of nearly 43%. Relative to competing funds, though, the real knockout came in 2009, when the fund ranked in the bottom quartile of its Morningstar Global Large-Cap Growth Equity category. The fund missed the market rebound in March 2009 almost entirely. Among the best stocks in 2009 were primarily low-quality assets and companies such as Bank of America, AIG, and Ford, which did not meet manager Lucy MacDonald's quality standards and/or were not considered in the strategy used. The first seven months of this year were also not enough for MacDonald to narrow the gap with the competition.
Lucy MacDonald leads RCM's global stock team and has been the manager responsible for RCM Global Equity since Oct. 2001, and RCM Interglobal since Sept. 2004. The funds are nearly identical and are managed using RCM's Global High Alpha strategy. Differences lie only in the fee structure and the Interglobal fund's ability to take short positions on falling prices. In addition to MacDonald, the team consists of five additional portfolio managers. The team is quite experienced and well-positioned in terms of size.
The investment approach is based on RCM's extensive research capacity and the 350-450 purchase recommendations provided by the buy-side analysts located around the world. From these, the portfolio managers search out high-quality companies that have healthy balance sheets, experienced management, and steady earnings and revenue growth. In addition to classical growth assets like Apple, MacDonald also invests in companies where growth can be expected from changes in management (Starbucks) or rising margins should significantly affect profits (Wells Fargo). This process initially yielded good results, but it is increasingly lagging behind expectations.
After the missed rally of 2009, MacDonald was unable to utilize the time through the end of July of this year to bring the fund back on track against competing products. The Luxembourg version of the fund analyzed here, in contrast with the German version (RCM Interglobal), does not charge a performance fee. We will wait to see whether MacDonald and her team can repeat their past success; until then, we have downgraded the fund's rating to Standard.
*The above returns are in EUR terms.
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