Upgrades
iShares Core UK Gilts ETF GBP Dist (IGLT) – Gold
Jose Garcia Zarate
A low-cost passive approach to the market of UK conventional government bonds makes perfect sense. This is a small, liquid market where the opportunities to add value over a standard benchmark are largely limited to duration calls. However, as this is a classic buy-and-hold exposure in a UK investment portfolio, the ups and downs on valuations in relation to changes in monetary policy would tend to balance themselves out. As such, the issue of cost becomes the crucial factor. This strategy now comes with a highly competitive ongoing charge of 0.07%, cut from 0.20% in May 2019. This makes us highly confident on the strategy’s ability to deliver returns above the category average over the long term, leading to an upgrade to Gold from Silver.
iShares GBP Index-Linked Gilts ETF Dist (INXG) – Bronze
Jose Garcia Zarate
The market of UK inflation-linked government bonds is structurally biased to very long maturities. Given this backdrop, an inflexible passive approach to this market may not be ideal at times of rising interest rates. However, this strategy is likely to be deployed as a core holding in a UK investment portfolio and so over the long-run, taking into account all phases of the monetary policy cycle, there is still a fair chance that its low cost would allow it to deliver returns above the category average. The strategy now comes with a highly competitive ongoing charge of 0.10%, cut from 0.25% in May 2019. This low fee will prove its worth over the long-run and is the key reason to upgrade the strategy to Bronze from Neutral.
Downgrades
Jupiter European Opportunities (JEO) – Silver
Samuel Meakin
Although we do not expect the portfolio or approach of Jupiter European Opportunities to change as a result of its upcoming move to Devon Equity Management, the element of uncertainty this introduces has led us to move the strategy's Morningstar Analyst Rating to Silver from Gold. Devon, a newly formed company founded by portfolio manager Alexander Darwall, will take over management of the strategy, which will be renamed the European Opportunities investment trust, from mid-November 2019. All said, we think the key positives remain in place here: an experienced and talented manager implementing a tried-and-tested process that has delivered strong returns over the longer term.
Invesco Developing Markets – Bronze
Gregg Wolper
In August 2019, as part of Invesco’s takeover of Oppenheimer, the original Ireland-domiciled UCITS vehicle for this strategy was terminated and its assets transferred into this newly launched Luxembourg-domiciled SICAV. We expect the strategy to be run in the same way and there have been no major changes to its key personnel, with Justin Leverenz remaining as manager. The fee for the representative clean share class of the SICAV is the same as it was on the Ireland-domiciled vehicle. However, under our new ratings framework, which places a greater focus on fees and benchmark-relative performance, the Morningstar Analyst Rating for the representative clean share class stands at Bronze, having been Silver on the previous vehicle. The other share classes range from Bronze to Neutral.
Note: Under the enhanced Morningstar Analyst Rating different share classes of funds may have different ratings
