New Ratings
State Street EUR Sustainable Corporate Bond Index – Bronze
Jose Garcia Zarate
Investors looking for a low-cost core holding with a well-structured environmental, social, and governance screening are likely to find that this fund fits the bill. The fund’s breath of coverage, its similar risk/return profile to its parent non-ESG benchmark, and, above all, its cost advantage, make us confident of its ability to deliver returns above the category average on a risk-adjusted basis over the long term. The fund is worthy of a Morningstar Analyst Rating of Bronze.
T. Rowe Price Funds SICAV - Frontier Markets Equity – Bronze
Mathieu Caquineau
This strategy was launched in 2014, so it is relatively young, but the fund manager, Oliver Bell, has good credentials for the task. He joined the firm in 2011 and previously held different roles in the emerging-markets equity team at Pictet AM. Bell builds a portfolio of quality companies with good growth prospects and keeps a close eye on macro risks. A team of six dedicated analysts works with Bell to find bottom-up investment ideas, and there is additional support from T. Rowe Price’s emerging-markets debt team to oversee currency and geopolitical risks. We think the investment process is well-suited for taking advantage of the firm’s large research resources and navigating the pitfalls associated with investing in frontier markets.
UBS Bloomberg Barclays MSCI US Liquid Corporates Sustainable ETF – Bronze
Jose Garcia-Zarate
This ETF is an interesting option for investors seeking exposure to corporate issuers with solid environmental, social, and governance credentials, while not sacrificing performance. The high liquidity requirements applied by the index make the portfolio biased to large-cap issuers. Also, the integration of ESG screens may result in a quality bias. But its cost advantage should keep it in good stead to deliver above-average risk-adjusted returns over the long term. The fund is assigned a Morningstar Analyst Rating of Bronze.
UBS Bloomberg Barclays MSCI Euro Liquid Corporates Sustainable ETF – Bronze
Jose Garcia-Zarate
This ETF provides exposure to companies with solid environmental, social, and governance credentials while ensuring broad diversification in the portfolio. In addition, its cost advantage is a key positive. The liquidity requirements imposed by the index may make the portfolio biased to large-cap issuers and with a quality tilt. However, this should not be detrimental in terms of performance over the long term. The fund is awarded a Morningstar Analyst Rating of Bronze.
Downgrades
Candriam Equities Biotechnology – Bronze
Jeffrey Schumacher
We have downgraded the Morningstar Analyst Rating for Candriam Equities Biotechnology to Bronze from Silver. We believe the fund still benefits from an experienced and talented lead manager and has a well-structured and thorough process in place, but the firm’s decision to drastically increase the maximum capacity of the strategy to accommodate significant inflows lowers our conviction. We believe the higher asset base already makes the fund less nimble and can shrink its investment opportunity set, potentially limiting the fund’s ability to invest in smaller companies in the universe. From our experience, such a drastic rise in assets and estimated capacity can harm the fund’s prospects and reduce its ability to extend its impressive track record.
