Upgrades
Robeco QI Global Conservative Equities – Silver
Jeffrey Schumacher
Robeco QI Global Conservative Equities’ experienced team, distinctive and robust process, and low fees have rewarded investors well, driving an upgrade to a Morningstar Analyst Rating of Silver from Bronze. The team behind this quantitative approach is large, stable, and experienced, and we hold it in high regard. The approach rests on a time-tested in-house developed quantitative model, which mainly seeks low-risk stocks as measured by their volatility and distress metrics, but valuation and momentum factors are also taken into account.
Our conviction in this approach has increased as we think this process to be highly disciplined and repeatable, and we value that the team has consistently enhanced the model over time. This fund’s ability to generate a countercyclical alpha has served investors well, as it has outperformed the category average and the market index on a risk-adjusted return basis since inception.
Downgrades
Jupiter Merlin Income – Bronze
Jupiter Merlin Balanced – Bronze
Jupiter Merlin Growth – Bronze
Rajesh Yadav
We have lowered the Morningstar Analyst Ratings of Jupiter Merlin Income, Jupiter Merlin Balanced, and Jupiter Merlin Growth funds to Bronze. The funds were previously rated Silver. While we appreciate the success achieved so far by an experienced team headed by John Chatfeild-Roberts, our conviction in the team’s Process has diminished somewhat. This is down to how the peer groups have evolved and our assessment on a relative basis, as well some structural limitations we see regarding the team’s ability to implement its views effectively across portfolios. Higher fees are also a further drag across the Merlin range. We still view the focus on downside protection as an attractive overall feature, backed by John Chatfeild-Roberts at the helm.
Loomis Sayles Multisector Income – Silver
Mara Dobrescu
We have downgraded the Morningstar Analyst Rating for Loomis Sayles Multisector Income to Silver, from Gold. The fund’s deep and seasoned team, contrarian strategy, and solid long-term returns count in its favour. That said, we have modest concerns surrounding the fund's equity stake. The portfolio's typically mid-single-digit common stock stake distinguishes it from the majority of its USD flexible bond Morningstar Category peers, while concentration in this stake adds idiosyncratic risk. However, for investors with the requisite patience, the fund remains a strong choice.
Moved From Under Review
GAM Multistock Luxury Brands – Neutral
Natalia Wolfstetter
GAM Luxury Brands used to be managed by a seasoned duo, Scilla Huang Sun and Andrea Gerst. As a part of the consolidation of GAM’s European equities function, they will be leaving the firm and Swetha Ramachandran has assumed responsibility for the strategy on 8 March 2019. She aims to broaden the pool of investable companies away from the current well-established, Western luxury companies to include those operating and listed in Asian and emerging markets.
These changes take into account the evolving nature of the luxury industry, but they also introduce additional risks which Ramachandran will have to demonstrate she can handle properly. We also need to see how well she makes use of the firm’s resources and how she shapes the portfolio before building conviction. We appreciate her extensive experience analysing consumer stocks, but this will be her first stint in a portfolio management role, and her workload will increase as she builds her knowledge of the broader universe of luxury companies. We are downgrading the strategy’s Morningstar Analyst Rating to Neutral.
