Upgrades
MFS Meridian US Value – Gold
Mathieu Caquinea
Our increased confidence in MFS Meridian US Value's established team and disciplined approach leads to an upgrade in its Morningstar Analyst Rating to Gold from Silver. Steven Gorham and Nevin Chitkara have been at the helm since 2002 and 2006, respectively. The veteran managers tap MFS's deep, stable, and experienced research team to find attractive investment ideas.
The process is straightforward, but the managers have executed it effectively and consistently. The strategy's solid long-term record can be largely attributed to superior performance in down markets, a product of its quality bent. The fund has impressively kept pace in bull markets as well.
Downgrades
JPMorgan American – Neutral
David Holder
Fund manager Garrett Fish draws upon fundamental analysis from the US Equity team and outputs from the behavioural finance unit to identify high-quality growth stocks for this core portfolio. There is also a more opportunistic, but relatively modest allocation to small-cap growth names.
However, the trust has a relatively low active share and low tracking error, and the core large-cap component has failed to consistently add value. The investment landscape has shifted over recent years, in that reliable and cheap exposure to the core S&P 500 is widely available for single-digit basis points.
Our conviction that the process can deliver dependable outperformance of the S&P 500 has diminished, and so we downgrade the fund to a Morningstar Analyst Rating of Neutral from Bronze.
Pictet Global Emerging Market Debt – Neutral
Niels Faassen
Following a recent Morningstar Analyst Ratings Committee meeting, we have lowered the Morningstar Analyst Rating for Pictet-Global Emerging Market Debt to Neutral from Bronze. Simon Lue-Fong, Pictet’s long-serving head of emerging-markets debt, resigned in May 2018. Mary-Thérèse Barton, who has been with the team since 2004, has succeeded Lue-Fong as team head. Guido Chamorro and Philippe Petit, who have been part of the team since 2007, have been appointed provisionally as heads of the hard-currency strategy. But Pictet is also looking to hire a senior investment manager and will make a definitive appointment only after the new member is on board. This casts a cloud of uncertainty on the hard-currency strategy’s future leadership.
Pictet Emerging Market Local Currency Debt – Neutral
Niels Faassen
We have lowered the Morningstar Analyst Rating for Pictet-Emerging Market Local Currency Debt to Neutral from Bronze. Alper Gocer, who joined the team recently, has been appointed as head of local-currency debt. He had been co-head for Pictet’s total return emerging-markets fixed-income team since 2016, and prior to that he worked as a portfolio manager for global macro hedge funds focusing on emerging markets. However, the appointment of Gocer as new head of local currency warrants caution, as he lacks a relevant public track record as lead manager for emerging-markets local-currency debt strategies.
Newton Multi-Asset Balanced - Neutral
Randal Goldsmith
The Newton Multi-Asset Balanced fund had been placed Under Review following the announcement that its manager Matt Brown would be stepping down to take up a full-time role in Newton’s Real Return team. Previously he had roles in both the Real Return and Multi-Asset teams. Responsibility for the fund has been given to the Multi-Asset team, with Simon Nichols as the new lead manager.
The manager has a solid track record and is supported by other experienced managers in Newton’s Multi-Asset team, but we have less conviction here than in the approach of the Real Return team. We also saw the previous interaction between the two teams as a favourable attribute. But, formal management is now the sole responsibility of the multi-asset team, so the fund has been assigned a Morningstar Analyst Rating of Neutral.
Newton Multi-Asset Growth - Neutral
Randal Goldsmith
The Newton Multi-Asset Growth fund had been placed Under Review following the announcement of manager Chris Metcalfe’s retirement. New lead manager Paul Flood is a member of Newton’s Multi-Asset team and is supported by alternate managers Charles French and Bhavin Shah, as well as other experienced members of the team.
As manager of the Newton Multi-Asset Diversified and Newton Multi-Asset Income funds, Flood has shown he can make effective use of the in-house resource and add his own slant to the portfolios, helping to build strong track records.
However, these have much wider asset-class diversification than Multi-Asset Growth, which Metcalfe ran mainly as a global stock-picking fund. With past success on Flood’s existing funds owing to broader multi-asset skills, it’s not clear how much he will change the approach to this fund to capitalise on his main strengths. For the moment we would therefore prefer to keep an eye on developments, so the fund has been assigned a Morningstar Analyst Rating of Neutral.
