New Ratings
Comgest Growth Japan – Silver
Hiroaki Sato
We have initiated coverage on Comgest Growth Japan, a Japanese equity strategy with a growth tilt. The strategy is managed in a collegial way by a team of four. Chantana Ward and Richard Kaye each sport over 20 years of investment experience, and they have been comanaging the Japan equities strategy for over 10 years, with two team members added along the way. The investment team employs Comgest's hallmark investment approach: a concentrated portfolio built on bottom-up stock selection focusing on quality growth. The strategy has delivered strong results for investors over the long term. The disciplined and time-tested investment approach managed by an experienced and stable team earns a Morningstar Analyst Rating of Silver across all share classes.
Cartesio Equity – Silver
Francesco Paganelli
We have initiated coverage of Cartesio Equity with Morningstar Analyst Ratings of Silver for its cheapest share class and Bronze for its more expensive shares. The fund was launched in the first quarter of 2020 and is the Luxembourg-domiciled clone of Cartesio Y.
Cartesio Income
Francesco Paganelli
We have initiated coverage of Cartesio Income with Morningstar Analyst Ratings of Bronze for its cheapest share class and Neutral for its more expensive shares. The fund was launched in the first quarter of 2020 and is the Luxembourg-domiciled clone of Cartesio.
Upgrades
BlackRock UK Special Situations – Silver from Neutral
Fatima Khizou
An experienced manager supported by a team of capable portfolio managers, together with a rigorous and proven investment approach, are driving our increased conviction in BlackRock UK Special Situations. We have therefore moved both the People and Process Pillar ratings to Above Average from Average, leading to an upgrade of the Morningstar Analyst Rating for its D Acc clean share class to Silver from Neutral.
Downgrades
Cartesio X – Bronze from Gold
Francesco Paganelli
Despite a disappointing first quarter in 2020, we think that Cartesio X keeps its key strengths intact. Driven by three skippers with decades of investment experience and large investments in their own funds, along with the support of a tight-knit team of four analysts, we rate this group as Above Average. Likewise, the process retains the potential to deliver positive long-term risk-adjusted returns and earns an Above Average rating. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the strategy's Morningstar Analyst Rating is downgraded to Bronze from Gold.
M&G European Corporate Bond – Neutral from Bronze
M&G (Lux) European Corporate Bond – Neutral from Bronze
The M&G European Corporate Bond strategy has a straightforward process that relies on the experience and top-down views of the portfolio manager. However, higher-than-average fees remain a headwind. Under our new ratings framework, which places a greater focus on fees and benchmark-relative performance, the Morningstar Analyst Rating for the strategy is lowered to Neutral from Bronze.
Pimco GIS US High Yield Bond – Bronze from Silver
Patrick Ge
Pimco GIS US High Yield Bond benefits from an experienced lead manager with a track record of sound judgement and the support of a sizable analyst group. It employs a disciplined approach that depends on the team's skill at uncovering mispriced bonds with underappreciated fundamentals while avoiding trouble and staying diversified. However, while our conviction in the People and Process Pillars has not changed, under our enhanced ratings framework, which places a greater emphasis on fees, the Morningstar Analyst Rating for the R clean share class has been downgraded to Bronze from Silver. Other share classes range from Silver to Negative.
Pimco GIS Global High Yield Bond – Bronze from Silver
Patrick Ge
Pimco GIS Global High Yield Bond benefits from an experienced lead manager with a track record of sound judgement and the support of a sizable analyst group. It employs a disciplined approach that looks to uncover mispriced bonds with underappreciated fundamentals on the higher-quality end of the high-yield spectrum. However, while our conviction in the People and Process Pillars has not changed, under our enhanced ratings framework, which places a greater emphasis on fees, the Morningstar Analyst Rating for the R clean share class has been downgraded to Bronze from Silver. Other share classes range from Silver to Neutral.
First State Asian Growth – Bronze from Silver
Andrew Daniel
First State Asian Growth remains a strong Asia ex-Japan equity offering for its solid management team and best-in-class investment approach. That said, under our enhanced ratings framework, which places an added emphasis on fees and expected benchmark-relative performance, this vehicle’s Morningstar Analyst Rating fell to Bronze from Silver.
Cartesio Y – Silver from Gold
Francesco Paganelli
Despite a disappointing first quarter in 2020, we think that Cartesio Y keeps its key strengths intact. Driven by three skippers with decades of investment experience and large investments in their own funds, along with the support of a tight-knit team of four analysts, we rate this group as Above Average. Likewise, the process retains the potential to deliver positive long-term risk-adjusted returns and earns an Above Average rating. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the strategy's Morningstar Analyst Rating is downgraded to Silver from Gold.
Dimensional US Small Companies – Silver from Gold
Briegel Leitao
Dimensional US Small Company is a broadly diversified market-cap-weighted fund that invests in smallcap US stocks while excluding the most expensive and least profitable. The rules-based but flexible trading strategy embedded in the fund, combined with its relatively low cost, should reward investors over the long term. While the People and Process Pillar scores remain unchanged at Above Average, our enhanced ratings framework, which places a greater emphasis on fees and expected benchmark relative performance, leads to a downgrade of the Morningstar Analyst Rating for all share classes to Silver from Gold.
JPMorgan India Ord – Neutral from Bronze
Samuel Lo
Rukhshad Shroff, the more senior and experienced of the two comanagers of the JPM India strategy, will retire on July 31 2020 and be replaced by Ayaz Ebrahim, who will work with remaining comanager Rajendra Nair. Shroff has comanaged this strategy since 2003 and his contribution will be missed given his greater role in decision-making over the years, although he leaves the firm on the back of an extended period of underperformance and heavy outflows. Incoming comanager Ebrahim has 30 years of industry experience and joined the firm from Amundi in 2015. He has a mixed track record as a regional Asian equity manager, and we have yet to build conviction in him as an Indian equity manager.
We also need to time to observe the new team dynamics, where Ebrahim will focus on portfolio construction and leave stock selection to Nair. Ebrahim will also bring some changes to the strategy’s execution, such as a closer eye on sector concentration and increasing the number of portfolio holdings, although the exact changes and effectiveness are unclear at this stage. We have reduced both People and Process ratings to Average from Above Average on the back of our reduced conviction. As a result, the Morningstar Analyst Rating of this investment trust has been lowered to Neutral from Bronze.
Legg Mason Western Asset Asian Opportunities – Neutral from Bronze
Patrick Ge
Legg Mason Western Asset Asian Opportunities continues to be a solid option for investors seeking local-currency Asian bond exposure, benefiting from a stable team and well-established investment formula. While the People and Process Pillar scores remain unchanged at Above Average, our enhanced ratings framework, which places a greater emphasis on fees and expected benchmark-relative performance, leads to a downgrade of the Morningstar Analyst Rating for all share classes to Neutral from Bronze.
Schroder ISF QEP Global Blend – Neutral from Bronze
Francesco Paganelli
We think Schroder QEP team retains several strengths, but the strategy’s People Pillar rating of Average reflects our ongoing concern around team turnover, while greater uncertainties around the continuity of the process have led to a downgrade of the Process Pillar rating to Average. Falling assets under management, a mixed track record, and lower confidence in the process thus lead to a rating downgrade for Schroder ISF QEP Global Blend. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating stands at Neutral for all share classes.
T. Rowe Price US Large-Cap Core Growth Equity – Silver from Gold
Katie Rushkewicz Reichart
Despite T. Rowe Price U.S. Large-Cap Core Growth Equity's promising future, the eventual retirement of experienced lead manager Larry Puglia drops its Morningstar Analyst Rating to Silver from Gold. A new era looms for this strategy, which Puglia has successfully led since its 1993 inception. Puglia, 60 years old in 2020, has not set a date, but is likely to retire within the next two years. T. Rowe solidified succession plans by naming Paul Greene associate manager in January 2020, allowing him a long time to delve beyond his areas of expertise.
Note: under the Morningstar methodology different share classes of funds may have different ratings
