New Ratings
Vanguard ESG Global All Cap ETF – Gold
Dimitar Boyadzhiev
Vanguard ESG Global All Cap ETF's low ongoing charge and representative market-cap posture make it a compelling option for investors seeking exposure to global equity ESG passive funds. While this fund offers a comprehensive exclusion-based environmental, social, and governance approach, it also retains many of the diversification benefits of an unscreened global all-cap index. The fund's benchmark, the FTSE Choice Global All Cap Index, is constructed by applying screens to its parent index, namely the FTSE Global All Cap.
Companies that are associated with controversial conduct, as defined by the United Nations Global Compact Principles (UNGC), or involved in business activities such as non-renewable energy, vice products, weapons for military and nonmilitary use are excluded. With an ongoing charge of only 0.24%, it is one of the cheapest funds in the global large-cap blend equity Morningstar Category, which includes passive and active funds offering exposure to both developed- and emerging-markets stocks. For all these reasons, we have awarded this fund a Morningstar Analyst Rating of Gold.
Upgrades
Baillie Gifford Global Income Growth B – Silver from Bronze
Teodor Dilov
An experienced management team that benefits from a transparent three comanager structure aimed at limiting individual biases, and which is backed by a stable and well-resourced analyst team, has increased our conviction here and led to an upgrade of the People pillar to Above Average from Average. The strategy offers a differentiated approach to income investing in the global equity space, and the approach has been consistently executed since the current managers took over in 2015. The Morningstar Analyst Rating for the B clean share class is upgraded to Silver from Bronze. Other share classes range from Bronze to Silver, depending on fees.
Capital Group Global Allocation (LUX) Z – Gold from Silver
Thomas De fauw
Capital Group Global Allocation impresses with its seasoned manager team, proven approach, and a parent company that serves its investors exceptionally well. The fund remains one of our highest convictions within the category. Although we retain both the People and Process Pillar scores at respectively High and Above Average, rating changes among rivals in its category mean that the fund’s Morningstar Analyst Rating gets an upgrade from Silver to Gold for its Z share class. Pricier share classes are rated Silver to Neutral.
Downgrades
FSSA Asian Equity Plus III – Silver from Gold
Germaine Share
FSSA Asian Equity Plus continues to be backed by a talented manager, a supporting cast with an outstanding investment culture, and a time-tested investment process. While we reiterate both People and Process Pillar ratings at High, changes in the competitive landscape within the Asia-Pacific ex[1]Japan Equity Morningstar Category have prompted the downgrade of the Morningstar Analyst Ratings for the Ireland-domiciled vehicle’s share classes III to Silver from Gold. The other share classes maintain their Silver ratings.
JPMorgan China Pioneer A-Share – Bronze from Silver
Claire Liang, CFA
JPMorgan China Pioneer A-Share continues to benefit from a capable management team, broad analytical resources, and a well-structured investment approach. We reiterate our conviction in the strategy and maintain both the People and Process ratings at Above Average. However, the increased competition from lower-priced rivals in the China Equity – A Shares Morningstar Category has led to the Morningstar Analyst Rating for this Hong Kong unit trust to drop to Bronze from Silver.
Robeco Global Consumer Trends Equities F€ – Bronze from Silver
Jeffrey Schumacher, CFA
Although our confidence in portfolio managers Jack Neele and Richard Speetjens remains high, a revision of the investment approach following the underperformance in 2021 slightly reduces our conviction. The managers decided to increase the position size of their highest conviction holdings, leading to a higher top-10 concentration. They also reduced the number of portfolio holdings by selling lower conviction stocks. The duo has also put more emphasis on a company's stability and sustainability of growth instead of the pace of growth, thereby making a clearer distinction between more speculative, higher-valued but unprofitable growth companies versus cash-generative established growers.
While recent adjustments to the investment process seem to make sense, a conscious decision to concentrate the portfolio around more established growth companies and reduce exposure to smaller and more speculative growth companies limits, in our view, the manager's ability to generate alpha from a market segment that has contributed meaningfully to the long-term performance of the strategy.
Although the managers are still willing to invest in more disruptive and riskier high-growth companies, the exposure will be muted. This creates some uncertainty about the strategy’s alpha potential, as the managers’ talent to spot future leaders early is no longer fully exploited. With the Process pillar score lowered from High to Above Average, equal to the unchanged People pillar score, the Morningstar Analyst Ratings come down one notch, ranging from Neutral to Bronze, depending on fees. The clean F€ share class earns a Bronze rating.
Stewart Investors Worldwide Leaders Sustainability III – Silver from Gold
Ronald van Genderen, CFA
Stewart Investors Worldwide Leaders Sustainability's unique, risk-aware approach makes it a strong choice for global equities, although our conviction in the team is slightly tempered by upheaval in the broader Stewart Investors Group and the lack of a singular strategy focus. The announced closure of the St Andrews Partners arm of Stewart following a strategic review is an incremental loss to the group's overall research effort. While the remaining sustainable funds group has become increasingly independent in recent years, it is relatively small, has a generalist analyst model, and its focus is spread across a range of strategies. This leads to a downgrade of the Morningstar Analyst Rating for the fund's cheaper classes, including the clean III share classes, to Silver from Gold, while its most expensive share class maintains a Silver rating.
Stewart Investors Worldwide Sustainability B – Silver from Gold
Stewart Investors Worldwide Sustainability VI – Silver from Gold
Ronald van Genderen, CFA
Stewart Investors Worldwide Sustainability's unique, risk-aware approach makes it a strong choice for global equities, although our conviction in the team is slightly tempered by upheaval in the broader Stewart Investors Group and the lack of a singular strategy focus. The announced closure of the St Andrews Partners arm of Stewart following a strategic review is an incremental loss to the group's overall research effort.
While the remaining sustainable funds group has become increasingly independent in recent years, it is relatively small, has a generalist analyst model, and its focus is spread across a range of strategies. For the UK vehicle, this leads to a downgrade of the Morningstar Analyst Rating for the fund's clean B share classes from Gold to Silver, while the more expensive A share classes retain their Silver rating. For the Ireland vehicle, this results in a downgrade of the Morningstar Analyst Rating for the fund's cheaper share classes, including the clean VI share classes, to Silver from Gold, while its most expensive share class maintains a Silver rating.
