Morningstar’s top picks for 2010

AMP Capital's global property approach keeps on impressing. Accomplished Chief Investment Officer Kim Redding shares portfolio management responsibilities with Jason Baine and Brett Ward, the latter relocating from London to Chicago in early 2010. Bottom-up stock selection tailored by region is the preferred source of value-add, which has proven to be the case over the longer term, and we're confident that this strategy will continue to add value into the future. While navigating choppy property markets hasn't been easy, this team continues to make a good case, and we can recommend AMP Capital to investors seeking global property exposure.

Vanguard's index offering is very hard to overlook in an asset class where many peers find it challenging to add value consistently. The shop's systematic process has done exactly what it sets out to achieve - provide low-cost exposure to the Australian listed property sector. Low fees and low portfolio turnover are key strengths. By charging less than most of its retail peers, Vanguard needs to clear a much lower hurdle before it starts to make money for its investors. Portfolio turnover is also among the lowest in this asset class, and that's a big plus from an after-tax perspective. Overall, we're highly-impressed by Vanguard's competitively-priced strategy. In a sector where the median fund manager has historically struggled to outperform the benchmark, Vanguard remains a standout option.

Schroders' Global Active Value approach to quantitative investing has considerable allure, and the distinctive process gives investors meaningful opportunities for long-term rewards. The quant process creates a heavy tilt to mid- and small-cap stocks along with the pronounced value leaning. The final portfolio is broadly-diversified, spanning more than 500 holdings without being index-like. There are a couple of cautionary points. Returns from mid- and small-cap value stocks tend to be lumpy, and this portfolio's high exposure to these segments adds extra volatility. We still believe, though, that Schroder Global Active Value is an ideal cornerstone for the value component of your international equities exposure.

Concentrated strategies live and die by the ability of their stockpickers, so Perpetual's offering is safe in the hands of accomplished veteran John Sevior. The shop runs a proven approach to analysing Australian stocks that has demonstrated its resilience through differing market conditions. The focus on quality stocks trading at cheap valuations is both intuitive and has been shown to work over time, displaying in particular downside protection in falling markets. The market-savvy, relative value approach generates higher levels of turnover than its value peers, which makes returns less effective on an after-tax basis. All in all, though, Perpetual's one of the best concentrated approaches on offer.

Schroders' Australian equities strategy is one of the finest around. The firm's robust and disciplined method of identifying sustainable growth in companies makes this one of the most consistently strong approaches to investing in Australian equities. Schroders' analysts focus on sustainable earnings growth, return on capital the key metric. The team aims to identify companies with significant pricing power and enduring competitive advantages. This disciplined approach is a real strength, as is the fact that the team prefers to take a series of smaller bets across the market rather than relying on a few large calls to achieve performance. But the shop's performance record shows that it's consistently among the best. And when you add an ultra-low wholesale fee and low turnover, it's not difficult to see why Schroders stands tall in this asset class.

Perpetual's small-cap strategy struggled to keep up with the crowd during the middle of this decade, but it's an approach to investing we still believe has merit. The relatively simple approach, focusing on quality companies trading relatively cheaply to the market, is a sensible way of investing in what can be a volatile market segment. The level of resources here is impressive, the duo able to call on Perpetual's deep research team. All up, this is a worthwhile package for risk tolerant investors.

We're supportive of the high-calibre crew, AQR Capital Management, operating BT's sophisticated quantitative models, and their demonstrable desire to keep a lid on costs. The value- and momentum-based philosophy drives the process and research agenda. The firm focuses purely on stock selection after BT curtailed AQR's responsibility for country and currency calls in November 2008. This reasonably-priced vehicle's personnel and robust stock selection outweigh its limitations, though, and should elevate AQR above its cohort for lengthy periods.

BlackRock's Global Allocation strategy demonstrates how investing across asset classes and superior management skill can really add value over the long term. The process combines top-down and bottom-up analyses in assessment of asset classes, sectors, stocks, and currencies. Over the years, the team has earned its stripes by targeting beaten-down asset classes, then waiting for markets to recognise their value. The strategy has a neutral benchmark weight of 60.0 percent invested in equities, and the remainder in fixed interest, and the same neutral allocation for US and non-US investments. BlackRock Global Allocation has outperformed consistently in both rising and falling markets, a credit to the people and process driving the strategy. We have no hesitation in putting it forward as an exceptional investment.

Colonial First State Global Credit Income's risk-conscious approach makes it a more than acceptable option for investors seeking broad diversified credit exposure. A large and knowledgeable team, advanced risk management systems, and the proven track record make for an impressive offering. Diversification is fundamental to Colonial First State's approach. The portfolio has in excess of 500 issuers across 42 countries and 65 industries, making it one of the most diversified strategies in the sector. For investors looking for a reliable credit approach which delivers consistent income generation, Colonial First State Global Credit Income is hard to beat.

Tyndall's traditional approach to investing in Australian fixed interest has played out in its favour over a number of years and should enable this to remain a top-notch option. The team positions the portfolio in sectors that are in its view sustainable over the long term, but also takes advantage of short-term prospects when appropriate. Retail clients will also find this option's highly-competitive fee good value. The team likes to hold securities to maturity where possible, which also helps keep costs low. While this vehicle may lag when credit is strong, its conservative nature means that it should still deliver in bad times. Tyndall Australian Bond serves investors extremely well, and we're convinced that they're still in very good hands.