TIP SHEET: Manning & Napier Fund Into Selective Equities
February 13 2012 - 3:29PM
Dow Jones News
January's equities rally may have prompted some investors to
pile back into the asset class, but Manning & Napier's
investment manager is cautious, especially regarding what to
buy.
"We are biased towards companies that have unique growth drivers
that would divorce them from what's going on in Europe," said
Christian Andreach, co-head of global equities at Manning &
Napier, and one of several managers of the Pro-Blend Extended Term
Series (MNBAX). "We'd like to see rotation into companies that have
compelling and identifiable growth tailwinds and are not dependent
on government spending and cyclical consumer spending. In other
words, companies who control their own destiny."
Equities indices, like the S&P 500 and the Dow Jones
Industrial Average, have risen about 5% so far this year and in a
rather stable trajectory, as investors shift their focus onto
company fundamentals and away from the global economic slowdown and
Europe's sovereign debt crisis. The rally prompted a few seasoned
managers to preach the benefits of owning stock.
Last week, money manager BlackRock Inc. (BLK) Chief Executive
Larry Fink said he thinks investors should "be 100% invested in
equities" on their low valuations and high dividend yields, while
billionaire investors Warren Buffett said owning equities are far
better over the long term than bonds or gold--two assets that
"enjoy maximum popularity at peaks of fear."
The Pro-Blend Extended Term Series doesn't have as aggressive an
attitude toward equities like some seasoned investment managers. It
is a $1.2 billion lifestyle fund which receives a four star rating
from Morningstar and three stars from S&P Capital IQ. It is
moderately overweight with a 58% allocation to equities. Bonds,
principally intermediate-term fixed income instruments, account for
just over a third of the assets. The fund has a mandate to keep
equities within the 40%-70% range.
"There's no real big asset allocation call," Andreach said.
Prudent stock selection, coupled with infrequent stock turnover,
allowed the fund to consistently outperform peers. In a 3-year
timeframe, the fund was up 14.4% over other asset allocation funds'
13.7%, S&P Capital IQ said. The margin widened to one
percentage point when considering performance over the last 10
years. In a 5-year timeframe, the fund was up 2.93%, 0.85
percentage points better than its category.
Catering to investors with a seven to 20 year investment
horizon, the fund has recently increased exposure to names like
Google Inc. (GOOG), Amazon.com Inc. (AMZN) and Time Warner Inc.
(TWX), believing these companies have excelled in their traditional
business, and have much room for growth providing media
content.
"Content becomes much more valuable. The days of a cable company
just making money off laying the cable lines are over," he said.
"Time Warner has tremendous media content, 10% free cash flow yield
and growth in their ability to command higher pricing."
S&P Capital IQ mutual fund analyst Todd Rosenbluth said many
of the stocks the fund holds, including Time Warner, Walt Disney
Co. (DIS) and Hess Corp. (HES), are undervalued stocks that are
very attractive in this low interest rate environment.
But Rosenbluth said compared to peers, Manning & Napier's
fund generates less income.
"Google, for example, is not a dividend paying stock," he said.
"Also, the fund has more equities than peers, resulting in less
yield."
Andreach said its fund would be a good fit to investors whose
"retirement, while not an immediate concern for them, is at least
near enough on the time horizon that they seek some degree of long
term capital appreciation."
-By Amy Or, Dow Jones Newswires, +1 212 416 3142,
amy.or@dowjones.com
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