New Ratings
JPMorgan US Select Equity – Silver
Jeffrey Schumacher
We initiate coverage on JPM US Select Equity with a Morningstar Analyst Rating of Silver, in line with its US version, JPMorgan US Equity JMUEX. The combination of a strong team with built-in succession planning, a robust process, and below-average fees supports our conviction. JPMorgan has announced that veteran manager Tom Luddy will step back from managing the fund in January 2018 and will be succeeded by Scott Davis as lead manager, in charge of 65% of the fund’s assets.
A sleeve of 10% will be managed by Susan Bao, with the fund since 2001, while a 25% portion remains in the hands of the analyst team supporting the managers. The team uses a robust and proven dividend-discount model, creating a diversified portfolio with limited stock-specific bets. Although this might sound like a recipe for mediocrity, the fund has consistently outperformed thanks to solid stock-picking across the board.
SPDR S&P 400 US Mid Cap ETF – Gold
Monika Dutt
This fund offers diversified exposure to US mid-cap stocks. With a low cost of 0.30% and a soundly constructed and representative benchmark, this fund is well positioned to continue producing superior risk-adjusted returns relative to its peers over the long-term.
T.Rowe Price Global High Yield Bond – Gold
Niels Faassen
Lead manager Mark Vaselkiv has applied the same value-driven process for T. Rowe’s high-yield strategy since he became lead manager on the U.S.-domiciled fund in 1996. Rigorous bottom-up credit selection has been successfully married with top-down macro analysis from T. Rowe’s veteran investment committee members, all at reasonable fees. T. Rowe and Vaselkiv have a history of putting shareholders first, including by closing the strategy to new investors in April 2012, the second time during Vaselkiv's tenure.
Upgrades
Candriam Bonds Euro High Yield – Silver
Mara Dobrescu
Philippe Noyard has been in charge of this fund since 1999 and relies on an experienced and tight-knit team of portfolio managers and analysts. This investment approach distinguishes itself through its high degree of conviction and its active share (the percentage of bond holdings that differ from the market index), which has historically ranged between 65% and 80%.
While we are keeping a close eye on capacity management at the strategy level, the experience of the team and the continued application of a proven investment process have consolidated our conviction.
db x-trackers MSCI Japan – Silver
Kenneth Lamont
We have upgraded this fund's rating following the fee reduction in April 2017 from 0.50% to 0.30%. The change aligns fees with some of the lowest cost funds tracking the MSCI Japan index and can be expected to boost future performance. The fund is one of several strong passive offerings in a category in which index trackers have performed strongly. The fund offers broad and representative cap-weighted exposure to Japanese large-cap equities for a fraction of the median price in the category.
This sizable cost advantage has contributed toward an impressive performance. The ETF has comfortably outperformed its surviving category peers over five and ten years when ranked on a risk-adjusted basis. The magnitude and consistency of the outperformance allows us to remain confident that the fund will continue to outpace rival funds going forwards.
Jupiter Dynamic Bond – Silver
Carlos Lucar
Lead manager Ariel Bezalel has been at the helm of this strategy for nearly a decade. He formulates the top-down positioning of the fund and relies on a focused but growing team of analysts for bottom-up idea generation. The resulting portfolio balances the capital preservation traits of government bonds with the income-generation brought on by the exposure to corporate credit.
Over time, Bezalel and team have been adept using the process’ flexibility to take advantage of the fund’s wide opportunity set to position the portfolio across different market environments to generate consistently strong results. Our conviction in the fund has gradually increased in recognition of Bezalel’s long experience and his successful execution of the process.
Jupiter Strategic Bond – Silver
Carlos Lucar
Lead manager Ariel Bezalel has been at the helm of this strategy for nearly a decade. He formulates the top-down positioning of the fund and relies on a focused but growing team of analysts for bottom-up idea generation. The resulting portfolio balances the capital preservation traits of government bonds with the income-generation brought on by the exposure to corporate credit.
Over time, Bezalel and team have been adept using the process’ flexibility to take advantage of the fund’s wide opportunity set to position the portfolio across different market environments to generate consistently strong results.
Our conviction in the fund has gradually increased in recognition of Bezalel’s long experience and his successful execution of the process.
