Morningstar Fund Ratings: Weekly Round-up

This global-equity market-neutral fund is managed by members of BlackRock's Scientific Active Equity Group and is steered by portfolio managers Kevin Franklin and Raffaele Savi, co-chief investment officers of active equities.

We think this is an attractive proposition in the equity market-neutral space. Applying a fully systematic, quantitatively driven process, managers look to build an edge particularly in gathering and refining signals based on non-traditional information.

A group of 40 analysts develop and refine models to identify long and short ideas for this portfolio, and the effort is backed by an impressive organisation that has increased its spending on data and renewed its commitment to strengthen the group managing this fund. The strategy’s track record since inception is relatively strong, but the fund’s price tag is a weak spot. Overall, our confidence in the team and the process underpins our positive view on the fund.

PIMCO GIS Mortgage Opportunities – Bronze

Mara Dobrescu

We have initiated coverage of the PIMCO GIS Mortgage Opportunities fund with a Morningstar Analyst Rating of Bronze. While the fund’s narrow scope on mortgage-related investments may not belong in every investor’s portfolio, its advantages include PIMCO's analytical edge in evaluating mortgage sectors and the team’s risk-aware portfolio construction.

The UCITS version of this strategy was launched in only 2017, but the longer-running US-domiciled vehicle has delivered category-topping returns since 2012, notably thanks to its nonagency mortgage stake. The strategies employed here court plenty of risk compared with most traditional bond funds, but manager Dan Hyman and his team have demonstrated that they can manage these risks prudently.

PineBridge Global Dynamic Asset Allocation – Bronze

Barbara Claus

We have initiated the coverage of PineBridge Global Dynamic Asset Allocation with a Morningstar Analyst Rating of Bronze. We think that with its highly robust approach to asset allocation and its experienced leadership, PineBridge Global Dynamic Asset Allocation is a solid choice for investors.

PineBridge’s key strength is the robust and repeatable nature of its investment process that dynamically allocates between growth and defensive assets such as equities and bonds based on medium- and long-term forecasts of asset-class outcomes.

It also benefits from the firm’s 21-person multi-asset team led by Michael Kelly that has seen low turnover among its senior ranks and which benefits from the firm's broader equity, fixed-income, currency, and private asset businesses. A sore point is the fee, which, at 2.01% for the fund’s euro-hedged A1H share class, is higher than most peers.

Nedgroup Inv Funds Global Property – Silver

Fatima Khizou

We have initiated coverage of Nedgroup Inv Funds Global Property with a Morningstar Analyst Rating of Silver. This Ireland-domiciled fund was launched in only July 2016, but its management is outsourced to Resolution Capital, whose global property strategy was founded in late 2008.

The fund benefits from a strong management team led by Andrew Parsons, who is a highly knowledgeable and practised real estate investor. The managers follow a sensible investment approach that combines top-down thematic and bottom-up fundamental research. The resulting portfolio is concentrated, with little resemblance to the FTSE EPRA/NAREIT Developed Index.

While this is a relatively simple process, its detailed fundamental research and execution stand out. We particularly like the deep appreciation for valuations and company risks, which helps identify temporary pricing dislocation and advantageous entry points.

Furthermore, we also think highly of the team’s ability to anticipate the impact of imminent big-picture themes on the real estate investment landscape, and here it has consistently been ahead of the curve relative to peers. Overall, the team has shown true investment skill, achieving an excellent long-term track record.

SLI MyFolio Multi-Man IV Inst Acc – Neutral

SLI MyFolio Multi-Manager I Inst Acc – Neutral

Randal Goldsmith

Following a Morningstar Analyst Ratings Committee we have awarded Analyst Ratings of Neutral to the SLI MyFolio Multi-Manager I and IV funds. MyFolio was among the first of the risk targeted fund offerings and has been managed consistently with its risk objectives throughout. As denoted by the names, the funds are part of MyFolio’s Multi-Manager range, which have the freedom to invest across the whole market. With this increased opportunity set there are higher charges, and these are above average within the funds’ respective Morningstar categories. This reduces our conviction on what is otherwise a product designed to serve investors well.

Upgrades

Alliance Trust Plc (ATST) – Bronze

David Holder

Alliance Trust seeks to be a core proposition for investors seeking long-term real returns via growth in capital and income. In 2017, after a comprehensive strategic review, the board tasked Willis Towers Watson to manage the trust’s assets, with an objective of outperforming the MSCI ACWI Index by 2% net of fees on an annualized three-year rolling basis. The investment approach applied by WTW is innovative and brings a hitherto institutional investment process to the retail market.

We believe that the changes here bring much promise for investors. We have seen sufficient evidence of the WTW approach to believe that this is a far-improved proposition for investors, combining as it does highly active management and low fees. Our conviction is consequently buoyed, and we have upgraded Alliance Trust to a Morningstar Analyst Rating of Bronze from its previous Neutral rating.