New Ratings
abrdn China A Share Sustainable Equity X Acc USD – Silver
We initiated coverage of Abrdn China A Share Sustainable Equity with a Morningstar Medalist Rating of Silver for its clean X share class. Its more expensive share classes are rated Bronze. The strategy is collectively managed by a four-member portfolio construction group, led by Chinese equities veteran Nicolas Yeo. Yeo brings two decades of experience and comes across as a capable investor with deep understanding of the China onshore market. The pod is part of a sizable 14-member Chinese equity team, which has been largely stable and has been expanding over the past five years. The team has consistently applied Abrdn’s firmwide, quality-focused investment approach, seeking companies with a strong business model and financial strengths. In line with the team’s quality focus, the portfolio’s quality metrics such as return on equity have trended above the benchmark MSCI China A Onshore Index over time. The team implemented the process skilfully, yielding strong long-term results.
Chloe Que
JPMorgan Aggregate Bond Fund C USD – Bronze
We initiated coverage of JPMorgan Aggregate Bond Fund with a Morningstar Medalist Rating for the strategy’s clean share class (C USD) of Bronze. Cheaper share classes are rated Silver, while more expensive share classes are rated Neutral. Head of Global Aggregate Myles Bradshaw (since November 2019), international fixed-income CIO Iain Stealey (since November 2009) and executive director Linda Raggi (since August 2013) are the lead managers of the strategy. The managers are backed by the well[1]resourced and experienced global aggregate team. Idea generation and security selection across global rates, investment grade, high-yield, securitised, emerging markets and currency benefits from the expertise of sector specialist teams.
In light of their extensive contributions to idea generation within their respective areas of focus three co-managers were added: Séamus Mac Górain on rates, Andreas Michalitsianos on investment grade credit (both since July 2020) and Nick Wall on currency (since March 2023). We appreciate the experience and asset allocation skills of the lead managers as well as the depth and quality of the available sector team resources, and initiate the People Pillar Rating at Above Average. Macro decisions are the dominant driver of the process. The strategy allows the team considerable flexibility in investing in a variety of sectors, such as developed- and emerging-markets sovereign and corporate bonds, securitized debt, and currencies. Since inception in 2009 the strategy outperformed its peers and category index in absolute and risk-adjusted terms. The team’s active allocation decisions have been generally effective over time and added value over a range of market regimes. We therefore initiate the Process Pillar rating at Above Average.
Evangelia Gkeka
JPMorgan Global Bond Fund HKD – Bronze
We initiate coverage of JPMorgan Global Bond Unit Trust with a Morningstar Medalist Rating of Bronze. The lead portfolio managers are Hong Kong-based executive directors Arjun Vij and Jason Pang. They are supported by Head of Global Aggregate Myles Bradshaw and international fixed-income CIO Iain Stealey, who are lead portfolio managers for JPMorgan Aggregate Bond, the SICAV sister fund. The managers are backed by the well-resourced and experienced global aggregate team. Idea generation and security selection across global rates, investment grade, high-yield, and emerging markets benefits from the expertise of sector specialist teams. We appreciate the experience and asset allocation skills of the lead managers as well as the depth and quality of the available sector team resources, and initiate the People Pillar Rating at Above Average. Macro decisions are the dominant driver of the process. The strategy allows the team considerable flexibility in investing in a variety of sectors, such as developed[1]and emerging-markets sovereign and corporate bonds, and currencies. Since the current management team took over in 2017 the strategy outperformed its peers in absolute and risk-adjusted terms, while it marginally underperformed its category index. The team’s active allocation decisions have been generally effective over time and added value over a range of market regimes. We therefore initiate the Process Pillar rating at Above Average.
Evangelia Gkeka
Manulife ASEAN Equity I – Bronze
We initiate coverage of Manulife ASEAN Equity with a Morningstar Medalist Rating of Bronze. The strategy has been managed by Kenglin Tan since its October 2015 inception. Tan sports 23 years of investment experience, 17 of them with Manulife, and she came across as knowledgeable of both the ASEAN region’s macro dynamics and her portfolio positioning during our April 2023 discussion. While we feel she is a capable investor, her workload as the investment team’s Asia specialist is heavy and there is significant key-person risk. Tan manages eight different mandates spanning the Asia-Pacific region and has substantial stock research responsibilities. The investment process follows a growth-at-a reasonable-price investing style, emphasising growth, cash flow generation, management quality, and valuations in its analytical framework. The framework is applied across all of Manulife’s Asian equities strategies, and Tan’s strict adherence to the approach provides the strategy with a competitive edge.
Hunter Beaudoin
Upgrades
BlackRock Global Unconstrained Equity D USD Acc – Silver
BlackRock Global Unconstrained Equity (UK) D DBP – Silver
Conviction continues to accumulate in the team and process here, resulting in an upgraded Morningstar Medalist rating of Silver from Bronze for its cheaper share classes, including the clean D share class. Managers Alister Hibbert and Michael Constantis seek businesses capable of growing faster than their rivals and widening their competitive advantages over a longer horizon than most investors consider. Unlike some growth peers, unproven and unprofitable companies are overlooked in favour of the rare exceptional businesses able to compound high returns on capital that will not revert to mean. Intended to be a “powerful expression” of the team’s best fundamental ideas, we expect the portfolio to be highly concentrated, exhibit low turnover, and have little regard for relative weights. Since inception in January 2020 to the end of May 2023, performance has been impressive, outperforming the MSCI World prospectus benchmark, MSCI ACWI Growth category benchmark, and the Morningstar global large-cap growth equity peer group by a significant margin.
Jack Fletcher-Price
GQG Partners Global Equity I USD Acc – Gold
Lead manager Rajiv Jain continues to rely on the same creative and successful “quality growth" approach here that he has used at various funds since the late 1990s, earning the strategy a High rating for Process. This strategy receives a People rating of High, an upgrade from Above Average, because of the expertise, experience, creativity, and proven record of Rajiv Jain, and the substantial, experienced analyst team with diverse backgrounds that he has built. As such the Morningstar Medalist rating earns an upgrade to Gold from Silver. GQG Partners Global Quality Equity won’t satisfy investors who prefer low turnover and a standard growth approach, but those willing to accept a flexible, sometimes rapidly changing portfolio managed by a talented and experienced manager can be well served here.
Gregg Wolper
Montanaro European Smaller Companies Investment Trust (MTE) – Silver from Bronze
This trust follows a long-established process and is supported by a strong analyst bank. George Cooke became lead manager here in 2012 and implements the firm’s quality growth philosophy. This is very much a bottom-up approach with analysts spending time on the ground with companies. Cooke has notably added value during his tenure via stock selection. With the Parent Rating moving to Above Average from Average, it has served as a driver to help the trust be upgraded to a Morningstar Medalist Rating of Silver from Bronze.
Jonathan Miller
Robeco BP US Select Opportunities Equities F USD – Gold from Silver
Longtime manager Steven Pollack, whose experience dates to the 1980s, started managing this strategy in 2001 and provides a solid foundation to successfully guide this transition. With an exceptional lead manager and sound succession plan the team merits a High People rating. The team employs a disciplined investment approach that is grounded in a three-pillar process. It seeks stocks with attractive valuations, strong fundamentals, and positive business momentum. An initial quantitative screen identifies stocks with these characteristics, providing analysts with a solid starting point for conducting fundamental research. The portfolio managers' nearly 40 years of experience in the industry, especially with Boston Partners’ value philosophy, gives this strategy an exceptional foundation. Together with a strong succession planning and a time-tested investment approach, the strategy continues to merit a High People rating and an Above Average Process rating. Nevertheless, as a result of changes in the competitive landscape within the US Mid-Cap Equity category driven the clean F USD share class, to a Morningstar Medalist Rating of Gold from Silver.
Andrew Redden
Downgrades
abrdn Indian Equity X Acc USD – Neutral from Bronze
abrdn India Opportunities SGD – Neutral from Bronze
Abrdn Indian Equity remains in the hands of a talented and stable portfolio management team and continues to support an Above Average People score. However, our confidence in the strategy’s investment process has slightly moderated, which has seen some inconsistencies and divergence in the execution of its quality-oriented investment approach. Some of the recent purchases and a few pre[1]profit/new-age IPO companies have made the portfolio's quality health less attractive than in the past. Therefore, we have downgraded the Process Pillar to Average from Above Average. As a result, the Morningstar Medalist Rating for the X Acc USD clean share class has lowered to Neutral from Bronze, and the cheaper Z share classes earn a Bronze rating downgraded from Silver.
Ramanand Kothari
Allianz Dynamic Multi Asset Strategy SRI 75 WT EUR – Bronze from Silver
A robust and time-tested allocation approach and an experienced team continue to back our positive view of Allianz Dynamic Multi Asset SRI 75. Lead manager Marcus Stahlhacke has been here since 2015 but has extensive previous experience from multi-asset investing at AllianzGI, which he joined in 1996. Stahlhacke has multiple other strategies under his remit as well, but we are comforted by the size of the backing resources and the experience of the two comanagers, Andreas de Maria Campos and Friedrich Kruse. The fund’s distinctive asset-allocation process balances two perspectives into a single view. But the fund does not come without risks: The team can push its investment degree to 125% based on a quantitative analysis of market trends and reversals as well as a fundamental analysis by the multi-asset team. It has used this leeway regularly, and this has helped it to outperform its peers. Although we retain both the People and Process Pillar ratings at Above Average, rating changes among rivals mean that the fund’s Morningstar Medalist Rating gets a downgrade to Bronze from Silver for its clean WT EUR share class. Other share classes are rated Bronze to Neutral.
Thomas DeFauw
BlackRock Global Funds - European Value D2 – Bronze from Silver
This strategy is managed by a seasoned and very knowledgeable portfolio manager together with a more junior but talented comanager. They are supported by a comprehensive and high-quality team that provides him breadth and depth of available resources warranting rigorous investment research. The approach has been built by Brian Hall and rests on a pragmatic definition of value, focusing on undervalued stocks rather than the lowest-valued stocks in the universe. Hall has implemented this approach with consistency and good success over his tenure. While we haven’t changed any of the underlying pillars, changes in the competitive landscape within the European large-cap value equity Morningstar Category have resulted in the downgrade of the Morningstar Medalist Rating to Bronze from Silver for several of its clean D share classes. The ratings for other share classes remain unchanged and range from Neutral to Silver depending on fees.
Ronald van Genderen, CFA
BGF European Equity Income D2 – Bronze from Silver
Andreas Zoellinger, a European equities veteran within BlackRock’s fundamental European equity team, has been the strategy’s longstanding portfolio manager. During his tenure Zoellinger has demonstrated his ability to effectively leverage the ideas generated by the broader team, while also utilizing the strategy’s flexibility within the boundaries of their income mandate to go where they see opportunities. While we haven’t changed any of the underlying pillar scores, which remain Above Average for both People and Process, changes in the competitive landscape within the Europe equity income Morningstar Category have resulted in a downgrade of the Morningstar Medalist Rating to Bronze from Silver for its clean D2 share class. The ratings for other share classes range from Neutral to Silver depending on fees.
Jeffrey Schumacher, CFA
Rerated from Under Review
Fidelity Emerging Market Debt Y Acc USD – Neutral from Under Review
Effective July 1, 2023, the strategy will see lead manager Eric Wong stepping back to a co-portfolio manager role, while Paul Greer, a current comanager, will step up as lead portfolio manager. Greer, who has been associated with the strategy since January 2018, has a macro-level focus with expertise in sovereign and quasi-sovereign issuers in Latin America. However, unlike Wong, Greer is relatively unproven and has no prior experience in leading hard currency strategies. The upcoming reshuffle in the portfolio manager lineup combined with the move to a more benchmark-aware investment process, Fidelity Emerging Market Debt Y Acc USD - ‰ fromˆ- Arvind Subramanian Effective July 1, 2023, the strategy will see lead manager Eric Wong stepping back to a co-portfolio manager role, while Paul Greer, a current comanager, will step up as lead portfolio manager. Greer, who has been associated with the strategy since January 2018, has a macro-level focus with expertise in sovereign and quasi-sovereign issuers in Latin America. However, unlike Wong, Greer is relatively unproven and has no prior experience in leading hard currency strategies. The upcoming reshuffle in the portfolio manager lineup combined with the move to a more benchmark-aware investment process, reduces our conviction in the strategy. This warrants a downgrade in the People Pillar rating to Average, earning the strategy a Morningstar Medalist Rating of Neutral across all share classes (including the Y-Acc USD clean share class). The fund was previously placed Under Review.
Arvind Subramanian
PIMCO GIS US High Yield Bond Instl USD Acc – Neutral from Under Review
Pimco GIS US High Yield’s former lead manager will retire in June 2023. The strategy in place here is robust, but there is a new management configuration that may need time to settle in. It earns a Morningstar Medalist Rating of Neutral across all share classes. The strategy’s focus on fundamental bond-picking, supported by robust analytical resources, should remain unchanged following Andrew Jessop’s retirement. It retains an Above Average Process Pillar rating. While Pimco’s corporate credit resources are vast, the retirement of Andrew Jessop may weigh on this strategy in the near term. Its People rating has been downgraded to Average from Above Average. The fund was previously placed Under Review.
Brian Moriarty
Robeco Euro Credit Bonds I Euro – Silver from Under Review
Following portfolio manager and fixed income CIO Victor Verberk’s unexpected departure from Robeco on 5 June 2023, we have downgraded the People pillar rating for Robeco Euro Credit Bonds from High to Above Average. The loss of Verberk’s market and portfolio management expertise is a blow to an otherwise strong team. Lead manager Victor Verberk was at the helm since he joined Robeco in January 2008; comanagers Jan Willem de Moor and Peter Kwaak, who each boast more than two decades of credit experience, have supported Verberk here throughout that time. For the past year and a half, the day-to-day portfolio management and security selection responsibilities has rested with de Moor and Kwaak, while Verberk oversaw the strategy’s top-down positioning. While the loss of Verberk’s contributions is regrettable, we are comforted by de Moor and Kwaak’s deep familiarity with this strategy and the robust portfolio management and credit research expertise backing them here. These include an expanding group of twenty-two experienced credit analysts and six investment grade portfolio managers. The fund was previously placed Under Review.
Elbie Louw
Robeco Global Credits CH EUR – Bronze from Under Review
Following portfolio manager and fixed income CIO Victor Verberk’s unexpected departure from Robeco on 5 June 2023, we have downgraded the People pillar rating for Robeco Global Credits from High to Above Average. The loss of Verberk’s market and portfolio management expertise is a blow to an otherwise strong team. Verberk and Reinout Schapers have been at the helm since the strategy’s June 2014 inception, but for the past year and a half the day-to-day portfolio management and security selection responsibilities has rested with Schapers, while Verberk oversaw the strategy’s top-down positioning. The team intends to add another portfolio manager to the roster but has not yet selected Verberk’s replacement. While the loss of Verberk’s contributions is regrettable, we are comforted by Reinout Schapers’ deep familiarity with this strategy and the robust portfolio management and credit research expertise backing him here. These include an expanding group of 22 experienced credit analysts and six investment grade portfolio managers. The fund was previously placed Under Review.
Elbie Louw
RobecoSAM Euro SGD Credits C EUR – Bronze from Under Review
Following portfolio manager and fixed income CIO Victor Verberk’s unexpected departure from Robeco on 5 June 2023, we have downgraded the People pillar rating for RobecoSAM Euro SDG Credits from High to Above Average. The loss of Verberk’s market and portfolio management expertise is a blow to an otherwise strong team. Jan Willem de Moor and Peter Kwaak have been at the helm of this strategy since its 2010 inception and are experienced investors who have been with the firm for roughly two decades. While Verberk was not a named portfolio manager on this strategy, he was responsible for its top-down macro positioning, leaving day-to-day portfolio management and security selection duties to de Moor and Kwaak. This is similar to how the trio split responsibilities for this fund’s sibling strategy, Robeco Euro Credit Bonds. While the loss of Verberk’s contributions is regrettable, we are comforted by de Moor and Kwaak’s deep familiarity with this strategy and the robust portfolio management and credit research expertise backing them here. These include an expanding group of twenty-two experienced credit analysts, six investment grade portfolio managers and eighteen sustainability analysts. The fund was previously placed Under Review.
Elbie Louw
RobecoSAM Global SDG Credits CH EUR – Neutral from Under Review
Following portfolio manager and fixed income CIO Victor Verberk’s unexpected departure from Robeco on 5 June 2023, we have downgraded the People pillar rating for RobecoSAM Global SDG Credits from High to Above Average. The loss of Verberk’s market and portfolio management expertise is a blow to an otherwise strong team. Verberk and Reinout Schapers have been at the helm since the strategy’s May 2018 inception, but for the past year and a half day-to-day portfolio management and security selection responsibility has rested with Schapers, while Verberk oversaw the strategy’s top-down positioning. The team intends to add another portfolio manager to the roster but has not yet selected Verberk’s replacement. While the loss of Verberk’s contributions is regrettable, we are comforted by Reinout Schapers’ deep familiarity with this strategy and the robust portfolio management and credit research expertise backing him here. These include an expanding group of twenty-two experienced credit analysts, six investment grade portfolio managers and 18 sustainability analysts. The fund was previously placed Under Review.
Elbie Louw
RobecoSAM SDG Credit Income – Bronze from Under Review
Following portfolio manager and fixed income CIO Victor Verberk’s unexpected departure from Robeco on 5 June 2023, we have maintained the People pillar rating of Above Average for RobecoSAM SDG Credit Income. Portfolio managers Victor Verberk and Reinout Schapers have led the charge since the strategy’s April 2018 inception, with Evert Giesen joining the duo in June 2020. For the past year and a half, day-to-day management of the strategy has rested with Giesen, while Schapers and Giesen share the heavy lifting on security selection. Verberk was responsible for overseeing the strategy’s top-down positioning. While the loss of Verberk’s contributions is regrettable, we are comforted by Schapers’ and Giesen’s familiarity with the strategy and the robust portfolio management and credit research expertise backing them here. These include an expanding group of twenty-two experienced credit analysts, six investment grade portfolio managers and eighteen sustainability analysts. The benchmark-agnostic strategy aims to provide investors with a consistent income by investing roughly one third of assets each in investment grade credit, high yield credit and emerging markets debt, and relying on a combination of top-down calls and bottom-up security selection. Only issuers that Robeco’s sustainability analysts believe will make a neutral or positive contribution towards the UN Sustainability Development Goals (SDGs), are eligible for investment here. The fund was previously placed Under Review.
Elbie Louw
Moved to Under Review
Fidelity Europe A – Under Review from Bronze
Fidelity announced on 13 June 2023 that lead manager Victoire de Trogoff will take early retirement from the investment management industry and will leave the firm by the end of the year. Vincent Durel will take over as lead portfolio manager of Fidelity Europe, supported by Christian von Engelbrechten, current lead portfolio manager of Fidelity Germany, in a nondiscretionary advisor capacity. The shift will be effective by the end of the third quarter. This is a significant change for the strategy given that de Trogoff has been the sole decision-maker since 2007. While the strategy experienced a rough period in 2021 and 2022 from a performance standpoint, it is surprising to see her leave after over 15 years at the helm of the fund. We are placing the strategy under review as we reassess the longer-term impact on the strategy.
Francesco Paganelli, CFA
Fidelity Global Financial Services Fund Y Acc USD – Under Review from Silver
Portfolio manager for Fidelity Global Financial Services since 2010, Sotiris Boutsis has announced his intention to retire, effective 1 Aug 2023. Muhammad Elatab, the co-portfolio manager on Fidelity Funds Iberia, and Lee Sotos, both long-standing members of Fidelity's financials-sector team, have been chosen to replace Boutsis on the Fidelity Global Financial Services strategy. Given Elatab's new responsibilities, he will relinquish his comanager role on the Iberia fund to focus his time and expertise on the financials sector. He will also relinquish his role as assistant portfolio manager on Fidelity Funds European Dynamic Growth and FAST Europe. We are placing Fidelity Global Financial Services under review as we assess the impact of these significant changes. The strategy previously carried Morningstar Medalist Rating of Silver or Bronze depending on the fees.
Harsh Jain
