New Ratings
Liontrust Sustainable Future Managed – Bronze
Rajesh Yadav
We have initiated coverage on the Liontrust Sustainable Future Multi-Asset range of funds with a Morningstar Analyst Rating of Bronze across the board for their clean share classes. These funds are managed by an experienced and long-tenured team, headed by seasoned Peter Michaelis. He has been involved with sustainable investing since 2001 at various firms, including head of sustainable and responsible investment at Aviva Investors. This strong team of 13 dedicated specialists is responsible for analysing sustainability, financial, and valuation characteristics of each investments. The core of the team has been together for over a decade and has built a lot of proprietary knowledge among the members. Analysts use a proprietary sustainability matrix to assess the overall quality of management and business strength of a company. They also use an integrated approach, where they analyse companies’ fundamentals in light of business- and industry-specific environmental, social, and governance factors. Overall, we find the process is well-structured and has been consistently implemented through time.
Capital Group New Economy - Silver (LUX)
Samiya Jmili
We have initiated coverage on Capital Group New Economy with an Above Average rating on both People and Process, which results in the fund’s cheapest share classes earning a Morningstar Analyst Rating of Silver, while pricier shares are rated Bronze. Our positive view on the team reflects its systemic strengths and the managers' experience and alignment with investors’ interest. This strategy’s assets are split between two subsidiaries: Capital Research Global Investors and Capital World Investors. Both manager teams have seen turnover recently, but the newcomers have risen the ranks of Capital’s talented investment team and previously managed assets here in an undisclosed manner. The seven portfolio managers of the two teams each draw on a deep and stable bench of about 50 analysts to hunt for attractive investment opportunities in innovative companies across market caps and geographies. The individual sleeves allow managers to independently ply their preferred investment style, which produces a deep portfolio.
Brown Advisory US Sustainable Growth – Silver
Samiya Jmili
Brown Advisory US Sustainable Growth was launched in April 2017, but managers Karina Funk and David Powell have managed this strategy together for more than a decade in the United States. Funk has a long history conducting environmental, social, and governance analysis, while Powell brings more than two decades of industry and firm experience to the helm. The duo is supported by Brown Advisory’s equity and sustainability research broad resources. The co-managers ply here a high conviction buy-and-hold investment philosophy which hinges on a comprehensive ESG approach: rather than using ESG analysis just to look at companies’ risks, the managers ensure ESG factors drive their fundamental investment theses and seek firms with ESG-driven long-term competitive advantages. The strategy’s cohesive team and thoughtful approach leads us to initiate coverage with a Morningstar Analyst Rating of Silver on the fund’s cheapest share classes, while pricier ones warrant a Bronze rating.
Upgrades
ASI Emerging Markets Equity – Bronze from Neutral
Andrew Daniels
ASI Emerging Markets Equity is collegially managed by the seven-member global emerging-markets pod, which boasts a wealth of experience and includes team leaders Devan Kaloo and Joanne Irvine, who are supported by the broader global emerging-markets equities team of 56. The pod structure, rolled out in early 2019 to improve accountability for portfolio construction decisions, was one of many improvements introduced since the 2017 Aberdeen and Standard Life merger. Other positive changes include assigning sector coverage responsibilities, introducing sector debate groups, and revamping the remuneration structure to better align compensation with performance.
On the process side, the quality and value tenets of the approach remain intact, though there has been an effort in recent years to have stock selection be the key performance driver, and the sector/country bets as well as active share have been reined in as a result. The focus on stock selection is a positive, as it better enables the management team to fully leverage the firm’s vast analytical resources, a clear competitive advantage. We believe the enhancements will improve returns going forward, driving the Process rating to Above Average from Average, which lifts most share classes’ Morningstar Analyst Ratings – including the X Acc USD clean share class - to Bronze from Neutral. Some cheaper and more expensive share classes earn Silver and Neutral ratings, respectively.
ASI Asia Pacific ex Japan Equity – Bronze from Neutral
Andrew Daniels
ASI Asia Pacific ex Japan Equity is collegially managed by the five-member Asia Pacific ex-Japan equity pod, consisting of Pruksa Iamthongthong, Flavia Cheong, James Thom, Christina Woon, and Louis Lu. The pod boasts a wealth of experience and is supported by the broader Asia Pacific equities team of 48. The pod structure, rolled out in early 2019 to improve accountability for portfolio construction decisions, was one of many improvements introduced since the 2017 Aberdeen and Standard Life merger. Other positive changes include assigning sector coverage responsibilities, introducing sector debate groups, and revamping the remuneration structure to better align compensation with performance.
On the process side, the quality and value tenets of the approach remain intact, though there has been an effort in recent years to have stock selection be the key performance driver, and the sector/country bets as well as active share have been reined in as a result. The focus on stock selection is a positive, as it better enables the management team to fully leverage the firm’s vast analytical resources, a clear competitive advantage. We believe the enhancements will improve returns going forward, driving the Process rating to Above Average from Average, which lifts most share classes’ Morningstar Analyst Ratings – including the X Acc USD clean share class – to Bronze from Neutral, with some more expensive share classes earning Neutral ratings.
Aberdeen New Dawn (ABD) – Bronze from Neutral
Andrew Daniels
Aberdeen New Dawn is collegially managed by the five-member Asia Pacific ex-Japan equity pod, consisting of Pruksa Iamthongthong, Flavia Cheong, James Thom, Christina Woon, and Louis Lu. The pod boasts a wealth of experience and is supported by the broader Asia Pacific equities team of 48. The pod structure, rolled out in early 2019 to improve accountability for portfolio construction decisions, was one of many improvements introduced since the 2017 Aberdeen and Standard Life merger. Other positive changes include assigning sector coverage responsibilities, introducing sector debate groups, and revamping the remuneration structure to better align compensation with performance.
On the process side, the quality and value tenets of the approach remain intact, though there has been an effort in recent years to have stock selection be the key performance driver, and the sector/country bets as well as active share have been reined in as a result. The focus on stock selection is a positive, as it better enables the management team to fully leverage the firm’s vast analytical resources, a clear competitive advantage. We believe the enhancements will improve returns going forward, driving the Process rating to Above Average from Average, which lifts the Morningstar Analyst Ratings to Bronze from Neutral.
ASI Asia Pacific and Japan Equity – Bronze from Neutral
Andrew Daniels
Flavia Cheong and Kwok Chern-Yeh lead ASI’s large and experienced Asia Pacific equities team of 48. We have a positive view on both leaders, especially Chern-Yeh, who is key to our conviction in the highly rated ASI Japanese Equity strategy. Day-to-day management of ASI Asia Pacific and Japan Equity sits with Cheong and Christina Woon, who form the Asia Pacific including Japan equities pod, which implements best ideas from both the Asia Pacific ex Japan equity and Japan equity strategies. The pod structure, rolled out in early 2019 to improve accountability for portfolio construction decisions, was one of many improvements introduced since the 2017 Aberdeen and Standard Life merger. Other positive changes include assigning sector coverage responsibilities, introducing sector debate groups, and revamping the remuneration structure to better align compensation with performance.
On the process side, the quality and value tenets of the approach remain intact, though there has been an effort in recent years to have stock selection be the key performance driver, and the sector/country bets as well as active share have been reined in as a result. The focus on stock selection is a positive, as it better enables the management team to fully leverage the firm’s vast analytical resources, a clear competitive advantage. We believe the enhancements will improve returns going forward, driving the Process rating to Above Average from Average, which lifts all share classes’ Morningstar Analyst Ratings to Bronze from Neutral.
Downgrades
Man GLG Japan CoreAlpha – Neutral from Silver
Robert Starkey
The pending retirement of Stephen Harker and other senior supporting members has dealt a blow to the strategy and has resulted in a Neutral Morningstar Analyst Rating for all share classes. For nearly two decades this strategy has been heavily reliant on the experience and insights of Man GLG’s head of Japanese equities, Stephen Harker. Long-time co-manager Neil Edwards has also been key to this strategy’s past successes, as to a smaller extent have consultants Alan Bell and Robert Brooke. The decisions of all four to retire by March 2021 leaves a large hole, and while Harker will remain under contract with the firm for a year thereafter, his involvement with the strategy is uncertain. Running the mandate will fall to Jeff Atherton, who formally takes over the reins in January 2021.While he has worked alongside Harker for many years, his experience running the assets here is limited.
Artemis European Opportunities – Neutral from Silver
Samuel Meakin
While the manager of Artemis European Opportunities is experienced and well-versed in the approach, the departure of his former co-PM without replacement leaves a hole. The unhedged I share class therefore receives a Morningstar Analyst Rating of Neutral (previously Silver). Mark Page and Laurent Millet had managed this strategy together since its inception in October 2011. They formed a robust partnership, bringing complementary skills to the table that were beneficial to the management of the strategy. With Page retiring from the partnership in October 2020, and with no immediate plans to hire a replacement, this leaves Millet as the sole dedicated resource here. The investment universe of European stocks is relatively quickly filtered down through initial screening using the in-house database he developed and maintains. Although this is useful, it still leaves a reasonably long coverage list for him to maintain as the sole dedicated analytical input. Therefore, while we hold him in high regard as an investor and credit his experience and knowledge of these companies, the additional workload may impact the overall rigour of the strategy.
BlackRock Corporate Bond – Bronze from Silver
Louise Babin
A solid manager and a well-implemented process backed by BlackRock's well-established fixed income platform make BlackRock Corporate Bond a decent choice in its Morningstar Category. Our conviction in the team and process has not changed, with both People and Process receiving Above Average Morning Analyst ratings. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the clean D share class is lowered to Bronze from Silver.
Note: Under Morningstar's ratings methodology, different share classes of a fund may have a different rating
