Upgrades
Parvest Bond Euro Government – Bronze
Mara Dobrescu
We have upgraded the Morningstar Analyst Rating for Parvest Bond Euro Government to Bronze, from Neutral. Investors benefit from the experience of manager Claude Guérin, who has been at the helm of the fund for more than a decade. The fund’s process, while not particularly distinctive, is expertly executed. However, as the fund’s portfolio doesn’t typically stray too far from the benchmark, its added value can be easily obscured by its fees. While we continue to criticize the high fees charged to retail clients, we also recognize that investors who are able to buy the fund’s rebate-free share class (P-C) get a much better deal, in absolute. Thus, we believe that, paired with more reasonable fees, this fund deserves our Bronze rating.
Downgrades
M&G Corporate Bond – Silver
M&G Strategic Corporate Bond – Silver
Ashis Dash
The M&G Corporate Bond Fund and M&G Strategic Corporate Bond funds have been downgraded to a Morningstar Analyst Rating of Silver. They were previously rated Gold. The funds’ long-term performance under manager Richard Woolnough is strong, however they have lagged the Markit iBoxx GBP Corporates Index and their Morningstar Category over the last five years. While duration usually is a lever of performance for an investment grade credit fund, it is disappointing to see that contributions from other elements, such as asset allocation and credit selection, have been modest and insufficient to offset the negative of effect of the funds’ short duration positioning over the last few years. Despite our positive view on Woolnough and his established process, the funds’ performance woes along with their above-median fees (in spite of their large sizes) have partly dented our conviction.
Click here to see an interview with Ashis on the M&G downgrades.
Neptune Global Alpha – Neutral
Neptune Global Equity – Neutral
Muna Abu-Habsa
The Neptune Global Alpha and Neptune Global Equity funds have been downgraded to a Morningstar Analyst Rating of Neutral. They previously held a Bronze rating. Several factors have contributed to our reduced conviction in the funds, but in particular the significant turnover witnessed on the analyst team supporting these funds, as well as more broadly the investment team at Neptune. We believe this has had a destabilising effect on the funds, impacting the ability of portfolio manager Robin Geffen to select stocks and manoeuver the funds in recent years. In addition, for a process that is predicated on getting top-down calls right consistently, performance has been disappointing, particularly in the context of the degree of risk taken. While we acknowledge Geffen’s experience in global equities, we no longer have conviction in his ability to add value over the benchmark in a meaningful way.
