New Ratings
BNY Mellon Global Absolute Return – Bronze
Matias Möttölä
We have initiated coverage on the BNY Mellon Global Absolute Return fund with a Morningstar Analyst Rating of Bronze. The fund is run by a 11-strong team headed by Matthew Merritt, a 15-year veteran at Insight (an affiliate of BNY Mellon) and surrounded by several experienced multi-asset investors. The fund’s process flexibly combines sleeves of long-only fixed-income, equity and real assets with alternative strategies. While the long-only side has precedence, the weights can change considerably through time, and we think execution has been reasonably good overall. The fund targets 3-month cash plus 4% target before fees over five-year periods.
Capital Group Capital Income Builder – Silver
Barbara Claus
We have initiated coverage of Capital Group Capital Income Builder with a Morningstar Analyst Rating of Silver. This Ucits fund was launched in September 2018 and follows the same approach as its U.S. sibling, the American Funds Capital Income Builder fund, which was launched in 1987 and also has a Silver rating. The strategy aims to provide investors with a high and rising income stream. It follows a multi manager approach and divides its assets across 11 named equity and fixed income portfolio managers. In a neutral stance, the strategy invests 70% in stocks and 30% in bonds, which plays to the firm's strength in equity research. Relatively low fees, an impressive line-up of equity managers, and an improved fixed-income effort support our positive view on the fund.
Goldman Sachs Emerging Markets Debt Base – Neutral
Jeroen Siecker
We initiate the coverage of Goldman Sachs Emerging Markets Debt Base with a Morningstar analyst rating of Neutral. Poor currency risk management is a weak spot in this strategy’s investment process; over the past three to five years, the team increased its long exposure to emerging-markets currencies against short positions in hard currencies. Despite a limited net active currency exposure, the strategy has struggled because of this positioning. Despite a properly staffed team with a long-tenured leader, turnover remains a concern.
Insight Broad Opportunities – Bronze
Matias Möttölä
We have initiated coverage on the Insight Broad Opportunities fund with a Morningstar Analyst Rating of Bronze. Another fund headed by Matthew Merritt and his 11-strong team at BNY Mellon affiliate Insight, also supported by several experienced multi-asset investors. The fund’s process combines sleeves of long-only fixed-income, equity and real assets with alternative strategies. While the long-only side has precedence, the weights can change considerably through time, and we think execution has been reasonably good overall. The fund targets 3-month cash plus 4.5% target before fees over fiv5-year periods—a return level which it has more or less matched since the fund’s inception in 2009 through to the end of May 2019.
PineBridge Asia ex Japan SmallCap Equity – Bronze
Jan Nel
PineBridge Asia ex Japan Small Cap has been expertly managed by impressive and experienced portfolio manager Elizabeth Soon for more than a decade. While the supporting 20-strong Asia ex-Japan Equities team has seen high turnover over the past three years, we are reassured by Soon’s heavy involvement with mentorship. The strategy follows a bottom-up, quality-growth approach, which has delivered strong returns over both the short term and long term. We initiate the strategy with a Morningstar Analyst Rating of Bronze.
Upgrades
BGF Emerging Markets – Bronze from Neutral
Andrew Daniels
Increased conviction in BlackRock Emerging Markets’ talented lead manager drives a Morningstar Analyst Rating upgrade to Bronze from Neutral. Gordon Fraser took over this strategy in March 2017, when former manager Luiz Soarez left the firm as a result of BlackRock’s active equity line-up changes. Fraser, who joined BlackRock in 2006 as an analyst, has 12 years of investment experience and has been successfully managing a hedge fund – BlackRock Emerging Frontiers – since 2011. Although Fraser isn’t as experienced as some of his peers, he not only comes across as a savvy and passionate investor but also delivers sound top-down and bottom-up insights.
Fraser overhauled the investment approach after taking control and runs the strategy in a similar fashion to the long-only portion of his hedge fund. He executes a style-agnostic approach by blending top-down and bottom-up research, with the goal of outperforming across market environments. Fraser developed a global emerging-markets macroeconomic dashboard, which provides a country allocation framework for the strategy, then leverages the team’s 25-plus global emerging-markets analysts to build this 50- to 70-stock portfolio. Although it is still relatively early in Fraser’s tenure, he is off to a good start, and conviction in his abilities make this strategy a worthy option.
HSBC GIF Euro High Yield Bond – Gold from Silver
Mara Dobrescu
We have upgraded our Morningstar Analyst Rating for HSBC GIF Euro High Yield Bond to Gold, from Silver. Philippe Igigabel has managed the strategy since 2003 and works closely with 14 other managers dedicated to credit at HSBC, as well as a team of around 30 analysts divided by sectors. The team's remarkable stability and a distinctive strategy that has been expertly executed through varied market conditions earn the fund an upgrade to a Morningstar Analyst Rating of Gold.
