New Ratings
Allianz China A Shares RT USD – Neutral
Chloe Qu
We are initiating coverage on Allianz China A Shares with a Morningstar Analyst Rating of Neutral for all share classes, including the clean RT share class. This strategy is comanaged by Anthony Wong and Kevin You. They collaborate on portfolio construction, and each is the final decision-maker for five sectors. Wong has 20 years of experience and took over the strategy in January 2014 and later comanaged the strategy with the former co-lead manager Sunny Chung between January 2016 and May 2021. You became named co-lead manager here in June 2021 upon Chung’s departure. He brings 15 years of experience but has no money management experience prior to his promotion as a comanager on Allianz China A Opportunities in January 2021.
We need more time to build conviction in You's investment capability, and the effectiveness of the new duo's collaboration will have to be tested under different market conditions. The managers apply a bottom-up approach, which looks for growth companies with balance sheet strength and a reputable management team that can deliver higher earnings growth than their industry peers. While the quality growth process is sensible, the portfolio's recent move into deep-value infrastructure and cheaply valued banking names has caused the portfolio's quality and growth metrics to become less pronounced, and the consistency of the managers' execution is worth monitoring.
Capital Gearing Ord – Silver
CG Absolute Return GBP M – Silver
Tom Mills
Open-end CG Absolute Return and closed-end Capital Gearing Ord (CGT) each represent a strong proposition for risk-averse investors seeking long-term capital growth. Key strengths include a well-tenured and highly focused team, and a consistent investment approach employed successfully over decades, with a clear emphasis on capital preservation. We initiate coverage with a Silver analyst rating both for CGT, and for CG Absolute Return’s sole share class. CG Absolute Return was launched in 2016 to provide investors a more liquid, open-end version of CGT, which CG Asset Management founder and CIO Peter Spiller has managed since 1982. Although relatively small, the team is focused on just two strategies; this and a real return one, which has a focus on inflation linked bonds. We like that all its staff are owners in CGAM through an employee ownership trust, which owns the majority of the shares. Along with high levels of co-investment in the funds, this owner-run boutique model is an attractive feature. CG Absolute Return employs the same flexible, long-only approach as CGT, sharing its objective to preserve and over time grow investors’ wealth in real terms.
The managers allocate flexibly across a diverse mix of assets that can be classified in three broad groups: risk assets; index-linked; and dry powder. Top-down decisions are the main driver of returns, while another lever is the team’s specialism in investment trusts, where it can exploit market inefficiencies. Relative to the closed-end CGT, which has the same strategy and asset allocation, CG Absolute Return has a keener eye on liquidity, so holds more ETFs and less small-caps, giving it a slightly higher market cap profile. We expect the vehicles’ performance and risk to be closely comparable. Over the long term the strategy has delivered attractive capital growth in real terms, while providing some shelter in the most adverse markets. Skilful asset allocation and the avoidance of large drawdowns have been instrumental in achieving these results.
T. Rowe Price Global Allocation Extended Q USD – Gold
Thomas De fauw
T. Rowe Price Global Allocation Extended benefits from a large and experienced team, a fine lineup of underlying strategies, and a broadly diversified portfolio. Portfolio managers Charles Shriver and Toby Thompson are backed by an 80-member multi-asset team, which is larger than most rivals and boasts proven veterans among its manager and research ranks. Management makes allocation calls but rarely deviates substantially from its neutral weights of 60% in global equities, 23% in fixed income, and 17% in cash and alternatives. The fund diversifies broadly and sensibly by investing in more than 15 underlying strategies that span various asset classes, styles, and regions.
All strategies are managed by T. Rowe Price with one exception. The alternative sleeve is made up of Blackstone Diversified Multi-Strategy and two internal funds: Multi-Strategy Total Return and Dynamic Global Bond. We initiate coverage on this strategy with a People rating of High and Process rating of Above Average, resulting in a Morningstar Analyst Rating of Gold for its cheapest share classes, including its clean Q USD share class, and a Silver for the pricier retail share classes.
T. Rowe Price Global Allocation Q USD – Gold
Thomas De fauw
T. Rowe Price Global Allocation benefits from a large and experienced team, a fine lineup of underlying strategies, and a broadly diversified portfolio. Portfolio managers Charles Shriver and Toby Thompson are backed by an 80-member multi-asset team, which is larger than most rivals and boasts proven veterans among its manager and research ranks. Management makes allocation calls but rarely deviates substantially from its neutral weights of 60% in global equities, 28% in fixed income, and 12% in cash and alternatives. The fund diversifies broadly and sensibly by investing in around 15 underlying T. Rowe Price strategies that span various asset classes, styles, and regions. We initiate coverage on this strategy with a People rating of High and Process rating of Above Average, resulting in a Morningstar Analyst Rating of Gold for its cheapest share classes, including the clean Q USD share class, and a Silver for the pricier retail share class.
Downgrades
JPM America Equity C (acc) USD – Neutral from Bronze
JPMorgan American Ord – Neutral from Bronze
Jeffrey Schumacher, CFA
The upcoming retirement of comanager Tim Parton in 2024 brings uncertainty for investors, leading to a downgrade of the People pillar score from Above Average to Average. Consequently, the fund sees its share classes that previously earned Bronze ratings, including the clean C (acc) USD shares, being downgraded to Neutral, where currently all its share classes land. The Morningstar Analyst Rating for the closed-end vehicle JPMorgan American Ord drops from Bronze to Neutral. JPM America Equity amalgamates the highest convictions of the veteran duo Jonathan Simon and Tim Parton, who run the strategy’s value and growth sleeves, respectively.
In July 2022, Parton announced his planned retirement, set for 2024. While J.P. Morgan has appointed his successor on some of the strategies he runs, it is still unclear who will take the reins for the growth sleeve of this portfolio, and how his sleeve will be managed from his retirement onwards. Since the strategy is run as a partnership, Simon has influence on who will become Parton’s successor. While Simon himself has not communicated a concrete plan to retire at this stage, he has reached an advanced stage of his career having spent 42 years at the firm. The question marks around succession planning for these longstanding and seasoned managers create uncertainties for investors.
