New Coverage
Invesco European Growth Equity – Silver
Francesco Paganelli
This fund is the Luxembourg-domiciled clone of the US-sold fund Invesco European Growth AEDAX, which has also a Morningstar Analyst Rating of Silver. We think this offering stands out among its Europe large-cap blend peers. The managers have three elements on their side: They have many years of experience, they've been working together as a team for more than a decade, and they stick with the same process that's proved successful here and at sibling funds. The fund’s three-, five-, and 10-year returns through Aug. 31, 2016, all lie in the top quartile of its Morningstar category. While it is relatively more expensive than the category median, we have strong conviction in it overall.
Loomis Sayles U.S. Growth Equity – Silver
Lena Tsymbaluk
We are initiating coverage for the Lux-domiciled Loomis Sayles U.S. Growth Equity fund with a Morningstar Analyst Rating of Silver. This is in line with the existing rating for the strategy’s UK-domiciled vehicle Loomis Sayles U.S. Equity Leaders, which has a longer track record. The manager, Aziz Hamzaogullari, has been successfully using the same process with largely the same analyst team since 2006, initially at Evergreen and since 2010 at Loomis Sayles. Through the proprietary bottom-up research framework, he looks to invest in the high-quality businesses with sustainable competitive advantages and profitable growth when they trade at a significant discount to intrinsic value. We have a high opinion of the manager’s experience in US equities and his disciplined, research-intensive approach, which has provided investors with a favourable risk/return profile over years. The fund therefore earns a Silver rating.
Upgrades
Loomis Sayles U.S. Equity Leaders – Silver
Lena Tsymbaluk
We have upgraded the Morningstar Analyst Rating of the Loomis Sayles U.S. Equity Leaders fund to Silver. The fund previously held a Bronze rating. The manager, Aziz Hamzaogullari, has been successfully using the same process with largely the same analyst team since 2006, initially at Evergreen and since 2010 at Loomis Sayles. Through the proprietary bottom-up research framework, he looks to invest in the high-quality businesses with sustainable competitive advantages and profitable growth when they trade at a significant discount to intrinsic value. We have a high opinion of the manager’s experience in US equities and his disciplined, research-intensive approach, which has provided investors with a favourable risk/return profile over years. The fund therefore earns a Silver rating.
Re-Assigned From Under Review
Schroder Global Emerging Markets – Bronze
Lena Tsymbaluk
This fund's rating was previously Under Review due to a change in the management team. Prior to that it held a Bronze rating. Allan Conway, head of the emerging markets team and the architect of the process, retired in August 2016. Tom Wilson, who has been part of the team for more than a decade, has become head of emerging markets. Wilson’s key responsibilities will include monitoring of the process implementation, chairing the strategy meetings and managing the team. The process is unchanged and stock selection will continue to be the responsibility of the three emerging-markets managers, Robert Davy, Waj Hashmi and James Gotto, who have been part of the team working alongside Conway for more than 10 years. Given the team-based approach here and stability of the wider management team, we have reinstated the Bronze rating.
Schroder ISF Emerging Markets – Neutral
Lena Tsymbaluk
This fund's rating was previously Under Review due to a change in the management team. Prior to that it held a Bronze rating. Allan Conway, head of the emerging markets team and the architect of the process, retired in August 2016. Tom Wilson, who has been part of the team for more than a decade, has become head of emerging markets. Wilson’s key responsibilities will include monitoring of the process implementation, chairing the strategy meetings and managing the team. The process is unchanged and stock selection will continue to be the responsibility of the three emerging-markets managers, Robert Davy, Waj Hashmi and James Gotto, who have been part of the team working alongside Conway for more than 10 years. While we appreciate the team-based approach here and stability of the wider management team, the fund’s fees are high. Given this is a benchmark-aware strategy, we believe this reduces the potential for future outperformance. This warrants a Neutral rating.
