New Ratings
Artisan Global Value – Silver
Peter Brunt
This Ireland-domiciled fund is managed as a near-identical clone of the US mutual fund Artisan Global Value, which has a Morningstar Analyst Rating of Silver. Dan O'Keefe and David Samra have managed this fund since its launch in March 2011. They apply the same distinct approach to value investing that they have applied since they joined Artisan Partners in 2002. The approach is primarily bottom-up and focuses on identifying companies with viable business models and sturdy balance sheets that they believe are trading below their intrinsic value.
In their search for ideas, the managers are well supported by a team of six analysts that we consider to be of good experience and stability. The strategy's success has resulted in considerable asset growth over the years--including the EAFE mandate, total assets under management stood at $17 billion at the end of June 2017--but we are reassured by the group's sensible and disciplined management of capacity. We believe that the fund is a strong choice for investors seeking global equity exposure with a value bias.
iShares S&P 500 EUR Hedged ETF Acc – Gold
Monika Dutt
This ETF provides broad, diversified, and euro-hedged exposure to US large-cap stocks. A solid body of evidence shows that active managers struggle to consistently outperform standard US large-cap equity market benchmarks, so taking a passive approach for this exposure makes a lot of sense. Furthermore, with an ongoing charge of 0.2% this is one of the cheapest ETFs available in the Morningstar US Equity - Currency Hedged category.
PowerShares FTSE RAFI US 1000 ETF – Bronze
Monika Dutt
This ETF breaks the link between market prices and portfolio weightings. This injects a disciplined rebalancing approach that should give the fund an edge over its peers over the long term. This is a sensible value strategy, but it is more expensive than several of its index peers, may overweight stocks with deteriorating fundamentals, and has inconsistent exposure to value stocks, limiting its Morningstar Analyst Rating to Bronze.
Vanguard US 500 Stock Index – Gold
Monika Dutt
This fund tracks the S&P 500, a market-cap weighted US large-cap equity index. A low fee of 0.06%—one of the lowest among all S&P 500 index funds and ETFs—and a soundly constructed and reasonably representative portfolio leave the fund well positioned to continue its long streak of producing superior risk-adjusted returns relative to its peers over the long haul, and underpin its Morningstar Analyst Rating of Gold.
Upgrades
Candriam Equities Biotechnology – Silver
Jeffrey Schumacher
Our conviction in the team behind this fund and its execution of a well-structured process has grown. This fund benefits from the vast experience of portfolio manager Rudy van den Eynde. He is supported by two knowledgeable analysts. The team uses a well-designed process where qualitative in-depth research and a deep understanding of clinical data are at the core.
The team constructs a well-diversified portfolio, which consists of large-cap stable growers combined with a tail of smaller bets on riskier industry innovators. The fund’s track record has put it among top-decile category performers over three, five, 10, and 15 years, while it has beaten the Nasdaq Biotechnology Index by 325 basis points annualised since the inception of the index.
Downgrades
Orbis SICAV Japan Equity – Bronze
Peter Brunt
A change in structure on 1 Jan 2017 made Moshal, rather than the Bermuda-based team, responsible for the makeup of the final portfolio. He leverages the investment ideas of the six-strong Japanese equities analyst team in London, then works closely with the portfolio construction team to help steer client capital into his highest risk-adjusted return ideas. Since 2012, when Moshal's paper portfolio has been the main driver of the final portfolio, the fund has outperformed peers and the benchmark, but to a lesser extent than earlier in the fund's life.
Reassuringly, throughout the life of the fund, stock selection has been the main driver of alpha. While we still have conviction in the fund's management team and structured investment approach, it is hamstrung by a fee structure we deem unfavourable. As a result, its Morningstar Analyst Rating is lowered to Bronze, reflecting our lower level of confidence in the fund's ability to outperform over the long term.
