Upgrades
Fidelity Asian Values (FAS) – Silver
Bhavik Parekh
We continue to view Fidelity Asian Values in a positive light, based on the disciplined implementation of the investment process by experienced portfolio manager Nitin Bajaj, and the resources available to him through Fidelity’s large pool of analysts. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the investment trust is upgraded to Silver from Bronze.
TB Amati UK Smaller Companies – Silver
Samuel Meakin
Paul Jourdan has managed the strategy since September 2000, initially at First State, then at Noble Group, before establishing Amati in 2010. Jourdan now manages the strategy alongside comanagers David Stevenson and Anna Macdonald. Jourdan’s longevity and the overall experience of the team, as well as the strength of execution of the investment process, have played out in investors’ favour over time. With our conviction having risen around these factors, and under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the B share class is upgraded to Silver from Bronze.
UBS MSCI United Kingdom (UC64) – Bronze
Dimitar Boyadzhiev
We have upgraded the UBS MSCI United Kingdom to Bronze from Neutral. At face value, the FTSE 100 is not what one would call an ideal index in terms of construction. Compared to the comprehensive FTSE All Share Index, it encompasses approximately 85% of the UK stock universe, which results in a bias towards large and giant cap. This precludes it from deriving potentially higher returns from smaller companies. However, despite these limitations, the MSCI United Kingdom has proved a formidable opponent for active managers to beat over the long-term. Aside from the funds’ meaningful cost advantage, we take a positive view of the level of sector diversification. As a result, we believe these funds will continue outperforming the average fund in the Morningstar UK Large-Cap Equity category on a risk-adjusted basis for years to come.
Downgrades
JPM US Select Equity Plus – Neutral
Jeffrey Schumacher
Although JPM US Select Equity Plus benefits from experienced hands, deep resources, and a decent process, an upcoming change in the collaboration between the two managers, uneven stock-picking by the analyst team, and ineffective execution of the process have lowered our expectations for this strategy to beat the Russell 1000 Index on a risk-adjusted basis in the long run. This has led to a downgrade of the People and Process Pillar to Average from Above Average and of its Morningstar Analyst Rating to Neutral from Silver across all its share classes.
Neuberger Berman High Yield Bond – Neutral
Louise Babin
The fund sports a deep and experienced team, but its process lacks a clear advantage over its high-yield bond Morningstar Category peers, leading to a downgrade of its Process Pillar rating to Average and a downgrade of its Bronze Morningstar Analyst Rating to Neutral on its clean I USD share class, and Negative on its most expensive share classes.
Xtrackers MSCI World Swap (XMWD) – Bronze
Dimitar Boyadzhiev
We have a strong conviction in the Xtrackers MSCI World Swap ability to outperform the Global Large Cap average peer. The underlying benchmark, the MSCI World, is a broad and diversified index that has proved a formidable opponent to beat. Its portfolio spans the entire market-cap spectrum, including more than 1,600 large- and mid- small-cap companies. This Xtrackers ETF complements the investment merits of the MSCI World and efficient portfolio management, however its ongoing charge is high compared to other funds that offer similar exposures, starting from only 0.12%. We’ve downgraded its rating to Bronze from Silver.
