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Über alle Markt-Zyklen langfristig Alpha generieren

José Luis García, Fondsmanager des MFS Meridian Funds Emerging Markets Equity I1 USD, sprach exklusiv mit e-fundresearch über das Management, die Strategie und Philosophie seines Fonds, wie er Mehrwert für die Anleger generiert und welche Ziele er sich noch setzt. Managers | 09.08.2012 02:00 Uhr
José Luis García, MFS Meridian Funds EM Equity / © MFS
José Luis García, MFS Meridian Funds EM Equity / © MFS Mr José Luis García, you are the fund manager of the MFS Meridian Funds Emerging Markets Equity I1 USD (ISIN: LU0219458113). Since when are your responsible for the fund management?

García: I first joined MFS in 2002 as the firm's first dedicated Latin American equity analyst based out of Mexico City. Then in October of 2006 I became the lead portfolio manager of our newly launched Latin American Equity strategy, which I continue to manage to this day. Almost exactly two years later, in October of 2008, I was named to the portfolio management team of our global emerging markets strategy. Today I co-manage the fund with my colleague Robert Lau who is based in our Singapore location Which benchmark do you adhere to?

García: As a global emerging markets investment strategy, the MFS Meridian Funds – Emerging Markets Equity Fund is benchmarked against the MSCI Emerging Markets Index. Are you also responsible for other funds at the moment?

García: Yes. In addition to the MFS Meridian Funds – Emerging Markets Equity Fund I also manage our Latin American Equity strategy and oversee the analyst-led research international portfolio. What is the total volume that you manage in all your funds?

García: At the end of June, the total volume across all of the funds I manage and/or coordinate was just over $9 billion USD. Regarding the performance: which performance did you achieve since the beginning of the year and in the years 2007-2011? Absolutely and relatively to the relevant benchmark?

García: So far this year, the fund is off to a very good start. Since the start of 2012 through the end of the second-quarter, the MFS Meridian Funds – Emerging Markets Equity Fund has returned +5.53% (I1 shares USD) relative to the MSCI Emerging Markets Index return of 3.93%. This represents 160 basis points of relative outperformance so far this year.

As it relates to the longer term performance of the fund – from November of 2008, my starting point on the fund, through the end of June 2012 the fund has returned 16.77% (I1 shares USD) which places us in the 26th percentile of our Morningstar category (Morningstar Category – Europe OE – Global Emerging Markets Equity). For this same period, the MSCI Emerging Markets Index returned 17.29% (USD returns). How content are you with your own performance in the last years and this year?

García: I'm not sure as a portfolio manager you are ever really truly content with your own performance... For me, it's really about doing the best possible job I can for our clients who have entrusted us with their assets. This entails putting in very long hours and working extremely hard every day to uncover new opportunities for our clients and ensuring that our portfolios are well positioned to deliver alpha over the long-term. As much as we strive for and would like to outperform the index every day, every month, every year, I really try my best to focus on the long-term and look to deliver strong positive relative performance over full market cycles. I believe the vast majority of our investors view emerging market equities as a long term investment and value this long-term investment approach. How are you able to deliver added value for your investors with your performance?

García: For us the best means of delivering value added to our investors is to generate excess returns relative to our index over a full market cycle. This means not only generating outperformance when markets are rising, but also delivering a measure of protection to our investors in down markets relative to the broader emerging markets index. I also believe that part of our value added is that our fund is uniquely positioned in the market place and offers several key unique characteristics relative to many of our peers. These differentiators are:
  1. Local Coverage: The MFS Meridian Funds – Emerging Markets Equity Fund is co-managed by myself, out of our Mexico City office, along with Robert Lau based in Singapore. This local presence allows us to uncover unique opportunities in these local markets that many other managers might fail to recognize. Additionally, it allows us to visit in person with the companies and management teams we invest in.
  2. Global Research: The collaborative nature of our global research platform at MFS gives us a unique advantage in the marketplace.
  3. Our bottom up fundamental process: This long-term / relatively low turnover approach, where we focus on secular growth trends in emerging markets, such as an expanding middle class, allows us to look through the near-term volatility in the markets and take advantage of dislocations in the marketplace.
  4. Focusing on the long term drivers that matter: We put a lot of weight on five key drivers; recurring normalized free cash flow, returns that are higher than cost of capital, low leverage, solid corporate governance and reasonable valuations. How long have you been a fund manager already?

García: As mentioned, I started my career with MFS back in 2002 as an equity analyst covering Latin America and first began managing assets in October of 2006 when we launched our dedicated Latin American Equity strategy. I feel I bring a unique and well-rounded approach to portfolio management as my professional life has afforded me the opportunity to experience emerging markets from the perspective of running a company (CEO - Telefonica's B2B division), private equity (as a principal at Texas Pacific Group), investment banking (financial analyst - Morgan Stanley) and finally as a equity research analyst and portfolio manager here at MFS.

Click on picture to enlarge!
Click on picture to enlarge! What were your biggest successes and your biggest disappointments in your career as fund manager?

García: For me personally  my biggest success, and a part of the job that is very satisfying, is being in a position to help our less experienced team members (junior analysts) develop into solid investors.  This is not only satisfying on a personal level, but it also benefits all of our portfolios in that it provides the firm with a great platform to work from as we analyze companies in many different countries and industries.

On the other hand, my largest disappointment always comes when we make a mistake in a stock. Although we try our best to do the most thorough and detailed due diligence for every stock we buy, there have been occasions where our underlying thesis has been wrong and we ultimately have to sell – detracting from our shareholders performance. We try to learn from these errors, and strive not to repeat them again, but despite our best efforts they still do fall into the disappointment bucket. What kind of capital market situation do we have at the moment? How do you act in this environment?

García: The current capital markets environment remains quite volatile to say the least. This volatility continues to be driven by policy makers and the ongoing debt crisis in Europe as well as the approaching "fiscal cliff" in the United States. As a result, emerging markets in particular have been negatively impacted by the “risk off” trade, weak trade flows, and delayed effects of tightening monetary policies. The good news however, is that with inflation pressures abating, central bankers and policymakers in emerging markets have started to ease policy in response to rapidly weakening economic momentum.

As a fundamental bottom-up equity manger in this type of environment it is of the upmost importance to continue to stick to your investment philosophy, focus on the long-term fundamentals of the companies that you are invested in, and to resist the temptation to allow emotional factors to drive your investment decision making. For example, our investment philosophy is structured around the following tenants which we have continued to adhere to in the face of the near-term spike in risk aversion:

  1. Companies with high returns on invested capital have the potential for compounded growth irrespective of economic conditions.
  2. Companies with exposure to positive secular trends (i.e. an expanding middle class) that trade at attractive valuations have the potential for multiple expansion.
  3. Long-term focus capitalizes on opportunities created by investors with shorter time horizons.

In addition to our overriding investment philosophy there are 5 key drivers that we focus on as part of our investment process which we alluded to above. These drivers in more detail are:

  1. Return On Invested Capital – It is critical that the management team of a company you invest in is in the business of  creating value for the investor rather than focused solely on "empire building".
  2. Free cash flow: This is an area of focus that I learned particularly well in my private equity days as it allows one to more accurately value a company, removes accounting irregularities from the investment equation, considers changes in working capital, and adjusts for real capital needs.
  3. Corporate Governance: This is crucial to our process. We hold an inherent bias against companies that are government owned or companies where the majority shares are closely held by individuals who have little regard for  minority shares holders.
  4. Leverage: In emerging market equity investing you do not need to invest in levered companies to do well. You already assume a fair amount of risk just by investing in emerging markets, such as: political risk, macro risk, regulatory risk, etc.  For us, it is ill advised to add financial risk on top of this.
  5. Valuation: While we view ourselves as growth investors in emerging markets you always want to be cognizant of valuation and never "overpay" for a company despite its growth prospects. What are the special challenges in this environment?

García: There are numerous special challenges in this type of investment environment – an environment that is characterized by heightened volatility and asset prices that react more to changes in the macro landscape, which is entirely out of our control, and less on the underlying fundaments or the more traditional drivers of prices, which is very much in our control. In this type of environment it is more important than ever to stay disciplined in your investment approach and to steadfastly adhere to your investment philosophy.

Click on picture to enlarge!
Click on picture to enlarge! What objectives do you have till the end of the year and in the mid term for the upcoming 3 to 5 years?

García: Similar to the way I approach investing I try to take the same consistent approach as it relates to the objective of the fund. This objective, over any time period, is simply to try to do our best to outperform our index and our peers in a risk adjusted manner. It is this consistent approach and constantly striving to do our best, as it relates to the companies we invest in, that ultimately benefits our shareholders. Do you model yourself on someone? Any ideals?

García: I'd like to think I am an independent thinker and above all try to use a healthy dose of common sense in all analyzis and decisions I take. That said, I have read as much as I can on investors like Warren Buffett and other long term investors who work hard, put a great emphasis on fundamental research,and are honest to their analysis. What motivates you in your job?

García: Simple - I love what I do. Being an investor is the very best job one can have. What is very unique about this job is that we analyze the past and present to try to predict the future as to how companies will fare. It is extremely gratifying when all the hard work translates into being correct as to what you  theorized would occur actually happens. Increasing our "batting average" as to these predictions, which results in solid shareholder returns, is for me a great motivator. What else do you want to achieve or do you have any further aims as a fund manager?

García: Again for me, it truly is all about providing the very best risk adjusted performance to our shareholders. What other profession would you have taken interest in, apart from becoming a fund manager?

García: I already had several jobs as mentioned above in different industries, and I can say with no hesitation whatsoever that being a fund manager at MFS is by far the most gratifying job I have ever had. Many Thanks!

Click on picture to enlarge!
Click on picture to enlarge!
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