New Ratings
Amundi IS MSCI World ETF DR – Silver
Monika Dutt
Amundi MSCI World tracks the MSCI World Index and is a broad and diversified fund that is a sensible option to hold throughout the full market cycle. MSCI World has a strong track record against its category peers, which also include active funds. Most recently, the fund has outpaced over 60% and 86% of its category peers over the past three- and five-year periods, respectively, while similarly priced ETFs that are tracking the same index have outpaced over 90% over the longer, ten-year period. We believe that its stellar performance is likely to continue, underpinned by its low ongoing charge, diversification and inability of actively managed funds to survive and outperform over the long run. The ETF and cheaper share classes earn a Morningstar Analyst Rating of Silver, while more expensive share classes earn a Bronze rating.
Dimensional Global Core Equity – Silver
Dimitar Boyadzhiev
Dimensional Global Core Equity offers broad exposure to stocks from 23 developed countries. Resting on the research of renowned academics such as Eugene Fama and Kenneth French, the strategy gives overweightings to stocks with lower valuations (measured by price/book ratio), smaller market caps, and higher profitability (using an adjusted measure of operating income). Research shows that stocks with these characteristics have tended to outperform over the long term.
This approach has delivered consistent outperformance over the past, and most recently the fund has ranked in the top quartile of the category on a risk-adjusted basis during the trailing 10-year period. The fund is a representative and well-diversified strategy that consists of nearly 8,500 holdings with a tilt towards smaller, cheaper, and more-profitable companies.
In addition, the weighting approach limits turnover, trades are executed efficiently, and the fees (0.26%) are amongst the lowest relative to rival active peers. With these attributes, we can expect the fund to continue producing superior risk-adjusted returns relative to peers. We have therefore awarded it a Morningstar Analyst Rating of Silver across all share classes.
Dimensional World Equity – Silver
Dimitar Boyadzhiev
Dimensional World Equity follows a simple and repeatable approach that blankets nearly every investable company in the world, including emerging-markets companies. Resting on the research of renowned academics such as Eugene Fama and Kenneth French, the strategy gives overweightings to stocks with lower valuations (measured by price/book ratio), smaller market caps, and higher profitability (using an adjusted measure of operating income). Research shows that stocks with these characteristics have tended to outperform over the long term. This approach has delivered consistent outperformance over the past, its exposure to emerging markets stocks limited its relative performance to the second quartile of the category on a risk-adjusted basis during the trailing 10-year period.
The fund is a representative and well-diversified strategy that consists of nearly 10,700 holdings with a tilt towards smaller, cheaper, and more-profitable companies. In addition, the weighting approach limits turnover, trades are executed efficiently, and the fees (0.35%) are amongst the lowest relative to rival active peers. With these attributes, we can expect the fund to continue producing superior risk-adjusted returns relative to peers. We have therefore awarded it a Morningstar Analyst Rating of Silver across all share classes.
EdenTree Responsible and Sustainable European Equity B – Bronze
Bhavik Parekh, CFA
EdenTree Responsible & Sustainable European Equity offers investors a unique proposition within Europe ex-UK equities. Long-term lead manager Chris Hiorns employs a value and sustainable approach and has done so to good effect since he took on the fund in 2007. He is supported by comanager David Osfield and each manager has their own dedicated analyst. Both Hiorns and Osfield have plenty of experience, particularly in sustainable investing, but they have other portfolio management responsibilities and there are limited dedicated resources which leads to an Average People rating.
The strategy employs ethical negative screens but positive ESG screening is also used identify preferred names. There is a clear value and contrarian approach to investing and the portfolio is reflective of that with valuation metrics such as P/E, P/B and P/S all well below benchmark. Key to the process is finding companies that can sustain good cash flows in the short to medium term. Solid execution of a sensible approach given additional sustainable considerations leads to an Above Average process pillar rating. We initiate coverage of with a Morningstar Analyst Rating of Bronze for the clean B share class. Other costlier share classes are rated at Neutral.
Downgrades
UBS (Lux) Equity Fund China Opportunity Q – Bronze from Silver
Claire Liang, CFA
UBS (Lux) Equity Fund China Opportunity continues to benefit from a skilled lead manager and a time[1]tested investment approach. However, the historically stable supporting team of seven has experienced heightened turnover in recent years and lost three more analysts in 2021, which is significant given its already lean size. The team’s development has also been slow. It has yet to backfill the departed tech hardware analyst’s headcount, and most of lead manager Bin Shi’s team development plans, such as adding more resources and training the team members to take more portfolio management responsibilities, have not materialized.
This contrasts with our preferred teams’ continued efforts in expanding their China equity resources, and we believe the UBS team’s competitiveness among its top peers has weakened. As such, we downgrade the People Pillar rating to Above Average from High, resulting in the Morningstar Analyst Rating being downgraded to Bronze from Silver for the Luxemburg[1]domiciled vehicle’s clean share class Q. Other share classes were downgraded to Bronze from Gold or Silver.
UBS (Lux) Investment SICAV - China A Opportunity Q – Bronze from Gold
Claire Liang, CFA
UBS (Lux) Investment SICAV – China A Opportunity continues to benefit from a skilled lead manager and a time-tested investment approach. However, the historically stable supporting team of seven has experienced heightened turnover in recent years and lost three more analysts in 2021, which is significant given its already lean size. The team’s development has also been slow. It has yet to backfill the departed tech hardware analyst’s headcount, and most of lead manager Bin Shi’s team development plans, such as adding more resources and training the team members to take more portfolio management responsibilities, have not materialized.
This contrasts with our preferred teams’ continued efforts in expanding their China equity resources, and we believe the UBS team’s competitiveness among its top peers has weakened. As such, we downgrade the People Pillar rating to Above Average from High, resulting in the Morningstar Analyst Rating being downgraded from Gold to Bronze for the Luxemburg-domiciled vehicle’s clean share class Q. The vehicle’s other share classes were downgraded from Gold to Silver or Bronze, depending on fees.
Invesco Greater China Equity Z USD Acc – Neutral from Bronze
Chloe Qu
While we continue to value portfolio manager Mike Shiao's experience and investment passion, the high level of team turnover and Shiao’s increased workload lessen our conviction in the investment team. We have therefore downgraded the People rating to Average from Above Average. The team instability has also lowered our confidence in the execution of the research-heavy, bottom-up-driven process. Recent changes in the portfolio's characteristics also spark concerns that the manager has drifted from the core principles of his long-term quality focus. Hence, we've also downgraded the Process rating to Average from Above Average. As a result, the strategy's Morningstar Analyst Rating was downgraded to Neutral from Bronze across all share classes, including the clean Z share class.
