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Which Fund Families in Europe Came out on Top?

Morningstar’s analysis of the 100 largest fund companies in Europe

Mara Dobrescu

 

When Morningstar evaluates fund families, we strive to identify which firms are in business to maximize their own profits and which firms build a fiduciary relationship with their investors. In our opinion, firms that put investors first and align their interests with their shareholders will succeed in the long run.  

In addition to a fund company’s regulatory history, Morningstar’s research considers:  

  • Corporate culture. Morningstar’s analysts assess this primarily on a qualitative basis through regular on-site due-diligence visits and meetings with senior management. The strongest corporate cultures exhibit a clear mission to put investors first and to attract and retain professionals who can execute that goal.  
  • Whether portfolio managers’ financial interests are aligned with those of investors, and how the fund companies approach the fees they charge investors who have increasingly sought out lower-cost options. 

We analyze how top fund families in Europe practice these principles in the “Fund Family 100.” This is the second edition of the semiannual report, which launched in first-quarter 2019. 

The report compared the largest 100 fund families (measured by assets under management for funds available for sale across Europe) across key metrics, such as manager retention and tenure, quality of the fund range, fees, and Morningstar Sustainability Rating™. Below, see some of our key findings.  

Top-ranking fund families for Morningstar Medalist funds  

Of the 10 firms with the highest proportion of medalists within their fund ranges, eight firms earn Morningstar Parent Pillar ratings of Positive. As shown on the chart below, the top three spots are held by Fundsmith, First State, and Pimco.  

  • Fundsmith is well-placed for investment excellence, with 100% of its assets held in medalist funds. The group has just three strategies; the fund’s fee structure is reasonable; and key personnel are heavily invested in the funds they run, making them well-aligned with investors’ interests.  
  • Pimco holds 75% of its assets in medalist funds and has succeeded in establishing a strong—but also rigorous, demanding, and intense—investment culture. After a rough patch of asset flight, the firm is back to a faster pace of hiring and is now taking more proactive steps in succession planning. The majority of its funds have produced strong results over the long term, as evidenced by the firm’s high average success ratios of 66% and 74% over the five- and 10-year periods ending July 2019, respectively. 

Top-ranking fund families for manager tenure 

Average manager tenure is a measure of team stability. As shown on the chart below, firms such as Lazard, Artemis, and MFS stand out in this area.  

  • Lazard Asset Management clearly benefits from an investment-centric culture with good manager retention (average manager tenure is 10.7 years) and low analyst turnover. In particular, the firm has a long-running emerging markets capability. However, it also has strengths elsewhere, including in several developed markets’ non-U.S. equity offerings.  
  • Artemis is a solid steward of investors’ capital, in our view, with an average manager tenure of 9.5 years. Its manager ranks are deep, and the level of investment experience is significant. Also, all managers are invested in the funds they run. The firm has made the process of launching new strategies more rigorous, and it has taken steps to better handle manager transitions, which should help foster continuity. 

Top-ranking fund families for Morningstar Sustainability Ratings 

Finally, we measured firms by the percentage of funds in their range that earn Above-Average Morningstar Sustainability Ratings (four or five globes). As shown below, the top-10 firms include Fundsmith, MFS, and iShares. 

MFS, which also ranks among the firms with the longest average portfolio-manager tenure, has extended its record as a responsible parent. The firm has a team-oriented culture, which mitigates key-manager risk.  

While only a portion of the firm’s funds has an explicit sustainability mandate, the focus on high-quality franchises and sustainable earnings growth in several of its equity funds typically results in a bias toward fund companies with an Above-Average Sustainability Rating (45% of its funds feature this rating). 

To see our analysis of all 100 fund families, download the Fund Family 100.

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The information, data, analyses and opinions presented herein do not constitute investment advice; are provided solely for informational purposes and therefore are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate.

The opinions expressed are as of the date written and are subject to change without notice. Except as otherwise required by law, Morningstar shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, the information, data, analyses or opinions or their use. The information contained herein is the proprietary property of Morningstar and may not be reproduced, in whole or in part, or used in any manner, without the prior written consent of Morningstar.

Investment research is produced and issued by subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC, registered with and governed by the U.S. Securities and Exchange Commission. 

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