New Ratings
Colchester Global Bond - Silver
Louise Babin
We have initiated coverage on the UCITS vehicle of Colchester Global Bond. The strategy benefits from a well-designed, robust process and a strong and collegiate team. Colchester applies a value-oriented philosophy to investing in government bonds and currencies. It is a clear, simple, and repeatable process centred on assessing value using proven economic frameworks--expected inflation-adjusted real return and purchasing power parity forecasts over the medium term. A welcome characteristic is the combination of systematic modelling and fundamental analysis, which fosters discipline and repeatable outcomes. The process also takes into account ESG considerations. The value-based approach has resulted in volatile performance during the recent market sell-off, but there are sufficient strengths to a Morningstar Analyst Rating of Silver for the I USD Unhedged share class. Other share classes are rated Silver and Bronze.
Upgrades
JPM China - Silver from Bronze
Chloe Qu
We continue to have conviction in JPM China’s strong lead portfolio manager Howard Wang, broad analytical resources, and consistently applied, growth-oriented investment process, with its People and Process Pillar ratings both reiterated at Above Average. Under our enhanced rating methodology, which places an emphasis on fees and benchmark-relative performance, the Morningstar Analyst Rating for its clean share class C has been upgraded to Silver from Bronze, while its other share classes are rated Silver and Bronze.
JPM Greater China - Silver from Bronze
Chloe Qu
We continue to have conviction in JPM Greater China’s strong lead portfolio manager Howard Wang, broad analytical resources, and consistently applied, growth-oriented investment process, with its People and Process Pillar ratings both reiterated at Above Average. Under our enhanced rating methodology, which places an emphasis on fees and benchmark-relative performance, the Morningstar Analyst Rating for its clean share class C has been upgraded to Silver from Bronze, while its other share classes land at Silver and Bronze.
Downgrades
Allianz Structured Return - Negative from Bronze
Francesco Paganelli
We have downgraded the Morningstar Analyst Rating of the Allianz Structured Return fund to Negative for all share classes. Due to a failure in its risk-management protocols, the strategy experienced greaterthan-expected losses amid the market sell-off in March 2020. While the team has de-risked the portfolio and is entering more-conservative options trades to limit further losses, at present there is too much uncertainty tied to the future of this strategy, and investors should avoid it in our opinion.
Lowland (LWI) - Bronze from Silver
Robert Starkey
The trust still has merits, chiefly its lead manager James Henderson, who provides longevity and an abundance of experience. However, upon a reassessment of the workload of Henderson and his comanager Laura Foll relative to peers, our conviction has been tempered. As a result, the Morningstar Analyst Rating is lowered to Bronze from Silver.
SPDR Bloomberg Barclays Emerging Market Local Currency Bond ETF - Bronze from Silver
Jose Garcia Zarate
This ETF remains an above-average strategy to gain access to the market of local currency emerging market bonds. The compound benefits of low cost and broad diversification of the portfolio should continue to play out well over the long-term. The index the ETF tracks has proved a good choice and comes with a higher quality tilt relative to other passive alternatives. But in the context of our improved ratings framework, which focuses on expected long-term net returns generation relative to the average category peer, the Morningstar Analyst Rating for this strategy has been adjusted down from Silver to Bronze.
iShares Emerging Market Local Government Bond ETF - Bronze from Silver
Jose Garcia Zarate
This ETF is an interesting option to gain access to the market of local currency emerging market bonds. The index it tracks has outperformed the category average over extended periods, although indices with a higher quality tilt, as measured in terms of credit rating, have performed better. In any case, the compound benefits of low cost and broad diversification remain key positives. But in the context of our improved ratings framework, which focuses on expected long-term net returns generation relative to the average category peer, the Morningstar Analyst Rating for this strategy has been adjusted down from Silver to Bronze.
