Upgrades
UBS ETF Fact MSCI USA Qual – Silver from Bronze
Briegel Leitao
UBS Factor MSCI USA Quality offers investors a portfolio of large- and mid-cap US equities with superior characteristics indicative of quality investments such as stable earnings growth, strong balance sheets, and durable profitability margins. The result is a fund that has delivered a healthy risk-adjusted performance premium over category peers on an ongoing basis. That said, concerns surrounding valuations and a sizable overweight to tech remain present with this strategy, limiting its Morningstar Analyst Rating to Silver.
Schroder ISF Asian Opportunities – Gold from Silver
Germaine Share
We have upgraded the People rating of Schroder ISF Asian Opportunities to High from Above Average based on our strengthened conviction in lead portfolio manager Toby Hudson. He has dedicated his 28 year investment career to Schroders and has consistently impressed us with his passion for investing and keen stock insights. His topnotch investment acumen has borne out in the stellar track records of his managed strategies, and he has become one of our favourite Asian equity managers. While we have some concerns about the analyst team’s ongoing turnover, we believe it is well positioned to weather these changes. Reassuringly, the strategy’s performance has not been compromised. Hudson continues to expertly apply a proven quality growth-focused investment process that benefits from a robust research framework, and the Process rating is reiterated at High. As a result, the Morningstar Analyst Rating for the clean share class C was upgraded to Gold from Silver. Other share classes land at Gold and Silver, depending on their fees.
Schroder Asian Growth – Gold from Silver
Germaine Share
We have upgraded the People rating of Schroder Asian Growth to High from Above Average based on our strengthened conviction in lead portfolio manager Toby Hudson. He has dedicated his 28-year investment career to Schroders and has consistently impressed us with his passion for investing and keen stock insights. His topnotch investment acumen has borne out in the stellar track records of his managed strategies, and he has become one of our favourite Asian equity managers. While we have some concerns about the analyst team’s ongoing turnover, we believe it is well positioned to weather these changes. Reassuringly, the strategy’s performance has not been compromised. Hudson continues to expertly apply a proven quality growth-focused investment process that benefits from a robust research framework, and the Process rating is reiterated at High. As a result, the Morningstar Analyst Rating for Schroder Asian Growth was upgraded to Gold from Silver across its share classes.
Schroder ISF Hong Kong Equity – Gold from Silver
Germaine Share
We have upgraded the People rating of Schroder ISF Hong Kong Equity to High from Above Average based on our strengthened conviction in lead portfolio manager Toby Hudson. He has dedicated his 28year investment career to Schroders and has consistently impressed us with his passion for investing and keen stock insights. His topnotch investment acumen has borne out in the stellar track records of his managed strategies, and he has become one of our favourite Asian equity managers. While we have some concerns about the analyst team’s ongoing turnover, we believe it is well positioned to weather these changes. Reassuringly, the strategy’s performance has not been compromised. Hudson continues to expertly apply a proven quality growth-focused investment process that benefits from a robust research framework, and the Process rating is reiterated at High. As a result, the Morningstar Analyst Rating for the clean share class C was upgraded to Gold from Silver. Other share classes land at Gold and Silver, depending on their fees.
JPM Korea Equity (Lux Domiciled) – Silver from Bronze
JPMorgan Korea (Hong Kong-domiciled) – Bronze from Neutral
Lena Tsymbaluk
John Cho has led this JPM Korea Equity strategy since February 2016, but he has been involved since 2011 alongside previous lead manager David Choi. Cho has substantial experience in the Korean equity market and is supported by one of the deepest teams in the region – JPM’s 100-member Emerging Markets & Asia Pacific Equity team. Our growing conviction in the fund manager’s expertise and his ability to navigate what has been a challenging market environment in recent years earn the strategy an increased People rating of Above Average. The strategy also benefits from a sensible approach with a contrarian style and a value tilt. Cho has executed the strategy consistently since he took over, delivering solid returns. The fund’s clean C share class has been upgraded a Morningstar Analyst Rating of Silver from Bronze. Other share classes range from Neutral to Gold, depending on fees. The Hong Kong-domiciled fund has been upgraded a Morningstar Analyst Rating of Bronze from Neutral.
Downgrades
BMO MM Navigator Distribution – Neutral from Bronze
Rajesh Yadav
While we maintain our Above Average conviction in the team and the process, under our new ratings framework, which places a greater emphasis on fees and benchmark-relative performance, the Morningstar Analyst Rating for the fund’s clean C share class is lowered to Neutral from Bronze.
BMO MM Navigator Cautious – Neutral from Bronze
Rajesh Yadav
While we maintain our Above Average conviction in the team and the process, under our new ratings framework, which places a greater emphasis on fees and benchmark-relative performance, the Morningstar Analyst Rating for BMO MM Navigator Cautious clean C share class is lowered to Neutral from Bronze.
Kempen (Lux) Euro Credit A - Neutral from Gold
Samiya Jmili
Experienced lead manager Alain van der Heijden and senior portfolio manager Harold van Acht are the last two team members left of the Kempen Euro Credit original line-up, after the rest of the team resigned in October 2020 to join a competitor. Losing most of its management team, including two of the most senior contributors – Pim van Mourik Broekman and Rik den Hartog – is a serious setback for this strategy. While we are comforted that Van der Heijden remains at the helm, the team lift deprives the fund from key resources which enabled its past success. It also creates uncertainty regarding its future even if damage control has been optimal and the hiring of long-term replacements seems well under way: it remains to be seen whether the new set-up will be able execute the strategy under van der Heijden’s thoughtful leadership as efficiently as the previous team did. The magnitude of the disruption justifies a downgrade of its People and Process Pillar ratings to Below Average and Average, respectively, leading in turn to a downgrade of the fund’s Morningstar Analyst Rating to Neutral from Gold across all share classes.
Kempen Euro Credit Plus – Neutral from Silver
Samiya Jmili
In October 2020, six of the eight members of the Kempen Euro Credit Plus’s investment team left Kempen to join a competitor. Among the leavers were two members of the investment committee - Pim van Mourik Broekman and Rik den Hartog - who played a key role in the strategy’s successful implementation. Losing most of its management team is a serious setback, especially that this strategy has a flexible mandate which allows more risk-taking compared with its staid sibling Kempen Euro Credit. While we are comforted that Van der Heijden retains leadership here, the fact remains that the strategy was deprived from key resources, which creates uncertainty regarding its future. Even if damage control has been optimal and the hiring of long-term replacements seems well under way, it remains to be seen whether the new set-up will enable as seamless execution as the previous team did. The magnitude of the disruption justifies a downgrade of its People and Process Pillar ratings to Below Average and Average, respectively, leading in turn to a downgrade of the fund’s Morningstar Analyst Rating to Neutral from Silver across all share classes.
M&G (Lux) Global Floating Rate High Yield – Neutral from Bronze
M&G Global Floating Rate High Yield – Neutral from Bronze
Louise Babin
M&G (Lux) Global Floating Rate High Yield is a differentiated proposition that offers global high-yield bond exposure, with negligible interest-rate duration. As investors’ views on the direction of interest rates has fluctuated, the strategy has seen sizeable inflows and outflows at various times. This and the necessity to hold a liquidity buffer given the illiquidity of the underlying have dragged on performance and lead to a downgrade of the Process rating to Average. This results in a Morningstar Analyst Rating downgrade for all share classes to Neutral from Bronze.
