Downgrades
Artemis UK Special Situations – Neutral
Samuel Meakin
Artemis UK Special Situations has been managed by Derek Stuart since its inception in early 2000. Stuart has over 25 years of industry experience and has managed various UK equity mandates, from equity income to mid- and small caps, during his career. He is supported by comanager Andy Gray, who joined Stuart on this mandate in 2013.
We acknowledge the managers’ experience, the consistency in their focus on finding internal change opportunities, and the style headwinds they have faced in recent years.
However, the UK value space features a number of competitors in whose investment approach we have greater conviction. As a result, the fund’s Morningstar Analyst Rating has been downgraded to Neutral from Bronze.
Merian UK Equity – Neutral
Jonathan Miller
A change of manager, and seeing how the incumbent shapes the remit, means this fund now holds a Morningstar Analyst Rating of Neutral, having previously been rated Bronze. Richard Buxton assumed responsibility for this fund on 1 Jan 2019, replacing Simon Murphy, who departed after a decade at the helm.
Buxton will run this alongside his responsibilities on the flagship Merian UK Alpha fund, looking to bring it in line with his style. It is too early to see how this plays out, which reinforces the Neutral rating.
Kames Absolute Return Bond – Neutral
Louise Babin
We have reinstated the Morningstar Analyst Rating of Neutral for Kames Absolute Return Bond. The fund had been placed Under Review following the news of the departure of comanager and head of fixed income Stephen Snowden. Snowden had comanaged the fund with Colin Finlayson since its inception in September 2011.
There was a clear separation of responsibilities between the two, with Snowden focusing on credit and Finlayson on interest rates. This has continued with Rory Sandilands assuming Snowden’s comanager role.
Sandilands joined Kames in 2016 and since October 2017 has also been a comanager on Neutral-rated Kames Sterling Bond. His prior experience has been in credit sales; therefore, he has a very limited portfolio management record. Finlayson is an 18-year Kames veteran within the rates department and brings some continuity here. Nevertheless, broader turnover in Kames’ fixed-income ranks, with 15 departures over the past three years, remains a concern.
Kames High Yield Bond – Neutral
Louise Babin
We have reinstated the Morningstar Analyst Rating of Neutral for Kames High Yield Bond. The fund had been placed Under Review following the news of the departures of comanagers David Ennett and Stephen Baines from the firm. Jack Holmes and Mark Benbow are now comanagers on this fund and Neutral-rated Kames High Yield Global Bond. They have six and four years’ experience in the high-yield market, respectively, which makes this team one of the less seasoned we cover in this universe.
The process aims to add value from security selection while diversifying risk across around 100 issuers. In-depth fundamental analysis of this number of holdings is a challenge for such a small team, and it is clear the team needs to be built up again for it to be considered on the same level as its average peer.
Kames High Yield Global Bond – Neutral
Louise Babin
We have reinstated the Morningstar Analyst Rating of Neutral for Kames High Yield Global Bond. The fund had been placed Under Review following the news of the departure of comanager David Ennett from the firm. Jack Holmes and Mark Benbow are now comanagers on this fund and Neutral-rated Kames High Yield Bond. They have six and four years’ experience in the high-yield market, respectively, which makes this team one of the less seasoned we cover in this universe.
The process aims to add value from security selection while diversifying risk across around 100 issuers. In-depth fundamental analysis of this number of holdings is a challenge for such a small team, and it is clear the team needs to be built up again for it to be considered on the same level as its average peer.
Kames Investment Grade Bond – Neutral
Louise Babin
We have assigned a Morningstar Analyst Rating of Neutral to Kames Investment Grade Bond. The fund was previously rated Silver and had been placed Under Review following the news of the departure of comanager and head of fixed income Stephen Snowden. Snowden had managed the fund alongside 16-year Kames veteran Euan McNeil since 2011. McNeil will be joined by Grace Le as a comanager on this vehicle and Kames Investment Grade Global Bond.
Le joined Kames in 2015 and has six years’ industry experience, though she got involved in portfolio management only in 2018. Whilst the portfolio managers benefit from being part of the wider fixed-income team that cohesively formulates top-down views and shares ideas across major bond markets, that team itself has seen a significant reduction in experience with the turnover since 2017, which limits our conviction.
Kames Investment Grade Global Bond – Neutral
Louise Babin
We have assigned a Morningstar Analyst Rating of Neutral to Kames Investment Grade Global Bond. The fund was previously rated Silver and had been placed Under Review following the news of the departure of comanager and head of fixed income Stephen Snowden. Snowden had managed the fund alongside 16-year Kames veteran Euan McNeil since 2011. McNeil will be joined by Grace Le as a comanager on this vehicle and Kames Investment Grade Bond.
Kames Ethical Corporate Bond – Neutral
Louise Babin
We have assigned a Morningstar Analyst Rating of Neutral to Kames Ethical Corporate Bond. The fund was previously rated Bronze and had been placed Under Review following the news of a number of departures from the fixed-income team at a senior level, including co-head of fixed income Stephen Snowden.
Following the most recent departures in November 2018, this fund’s managers have taken on additional responsibilities. Iain Buckle has taken on the head of credit position, and McNeil has been appointed lead portfolio manager on the team’s flagship Kames Investment Grade Bond and its global counterpart, Kames Investment Grade Global Bond. The managers’ added workload is a concern, as the success of this fund’s process ultimately relies on its execution.
Kames Sterling Corporate Bond – Neutral
Louise Babin
We have assigned a Morningstar Analyst Rating of Neutral to Kames Sterling Corporate Bond. The fund was previously rated Silver and had been placed Under Review following the news of a number of departures from the fixed-income team at a senior level, including co-head of fixed income Stephen Snowden. The fund has been managed by Kames veteran Iain Buckle since October 2009.
Up until August 2017, David Roberts, the former head of fixed income, was also a named manager here. He was replaced by comanager Rory Sandilands. Since the departures in November 2018, Buckle has taken on the role of head of investment-grade, and Sandilands gained additional portfolio management responsibilities as comanager for Neutral-rated Kames Absolute Return Bond, which significantly increases their workload. This limits our conviction in the fund, as the success of this fund’s process ultimately relies on its execution.
