How to be a top-rated manager? Just add value…

We take a look at the managers who recently scooped their first Citywire AAA ratings.

No fewer than 53 portfolio managers have picked up their first Citywire AAA rating, a dozen at the first time of asking.

The ratings were achieved for performance in the three years to the end of October – a decent month for equities after a dismal first nine months of 2022.

There was no single dominant sector in October but value remained a relatively safe haven and the style contributed to a host of first-time AAAs.

While still negative, the MSCI ACWI Value index has restricted losses to 6.3% year-to-date compared with a loss of 25.6% for growth equities.

Invest with energy

The lack of technology holdings and the strong performance of the energy sector this year have been big contributing factors to this relative outperformance.

One of the standout managers in Equity-US Value has been Cole Smead. Smead (pictured above) has been tracked by Citywire since 2014 and receives his AAA rating for his Smead US Value Ucits and Value funds.

Strong gains year-to-date have been a big factor in Smead’s run to the top, with both strategies outperforming the Russell 1000 Value’s 9.3% loss; the Ucits fund registered a 2.7% loss and the US-domiciled version just 2.3%.

A big part of this outperformance has been the success of the portfolios’ three largest holdings, Occidental Petroleum (up 117.7%), Merck (+45.5%) and Amgen (27.8% to the good). Together, they make up a fifth of the fund.

Another Equity – US Value team making the most of the favourable conditions is Devin Armstrong and James Warwick at the Invesco Comstock and Invesco Comstock Select funds. Active since 2007, their first AAA has been a long time coming.

Both funds are in the black year-to-date, gaining 1% and 2.6% respectively. Again energy was the key, with the pair’s favourite stocks including Marathon Oil, ExxonMobil and Chevron.

In total, value equity managers generated nine of the 53 first-time AAAs. In addition, 33 value managers moved back into the ratings and 59 improved their scores, while just 16 value managers moved down the ratings and only 17 lost theirs entirely.

Emerging lights

The blight on growth stocks has also hit emerging markets with the MSCI Emerging Markets index down around 21% so far this year. Against that background, it was quite an achievement for Mathieu Nègre of the UBAM Positive Impact Emerging Equity fund to get his first AAA rating, having entered the Citywire database in 2003.

In a notable piece of stockpicking, Nègre (pictured) added Chinese foodtech company Pinduoduo to the portfolio in November last year. It’s climbed 53.9% this year and accounts for 4.4% of the portfolio, which is underweight as a whole in Chinese equities, which have had a poor year.

He has also done well with Gentera, the Mexican insurance company, which leapt 69.4% in the year to the end of October.