Morningstar Fund Ratings: The Weekly Update
CT Responsible UK Income is a solid option for investors looking for exposure to an income portfolio of UK equities with a sustainable bias. We have good conviction in the manager, Catherine Stanley, who leads the team of seven global small caps. This part of the market capitalization scale is relevant because although the portfolio still holds stocks at the wider end of the UK market, a significant part of the FTSE 350 index is considered environmentally, socially and socially unacceptable. and governance. We recognize that, despite an otherwise good process, sustainable income investing is difficult in the UK equity universe. However, we still see enough merit to give the clean stock class a Bronze Morningstar Analyst Rating. The other share classes are rated Neutral.
Eastspring Investments US Corporate Bond combines a modest approach to risk taking with a penchant for bottom-up corporate research. Its institutional C share class earns a Morningstar Bronze analyst rating, while its own R share class and more expensive share classes are rated Neutral. Lead manager Mark Redfearn has been at the helm here throughout the strategy’s 15-year history, starting in 2007. His longevity is emblematic of sub-advisor PPM America’s investment culture, which aims to promote stability by developing talent internally and promoting it from within, while putting analysts on an equal footing with portfolio managers. The manager aims to outperform its benchmark, the Bloomberg US Credit Index, through moderate stock selection and sector betting within the universe of high quality US corporate bonds. This strategy’s risk-aware approach and in-depth credit research capabilities are a strong combination, earning it above-average scores for people and process.
Eastspring Investments Unit Trusts – Singapore ASEAN Equities – Neutral
Recent team rotation and process changes have limited our conviction in Eastspring Investments Unit Trusts – Singapore ASEAN Equity. After two departures in early 2022, including lead manager of this strategy and sole ASEAN equity analyst, new lead manager Bryan Yeong has had to take on much of the equity hedging and management responsibilities for several other ASEAN equity mandates. Eastspring’s co-manager and head of growth stocks, John Tsai, is also named here, but takes on more of a figurehead role and focuses primarily on his team oversight responsibilities. He plans to leave the fund eventually. Two new team members were hired in June 2022 to replace and lighten Yeong’s workload, but more time is needed to build conviction of their portfolio management abilities, a position none of them have. previously occupied. Additionally, Yeong has only been leading this offering since April 2022 and has produced lackluster records on his managed strategies. As a result, the strategy receives a below-average People rating. The unit trust follows a sensible process that aims to generate outperformance against its custom benchmark of 50% FTSE ST All-Share Index and 50% FTSE ASEAN (ex-Singapore) Index, but adjustments have been made to the mid-2020 to tilt the portfolio more towards quality growth at a reasonable price from its historical value bias appears to have had minimal effect. Due to a lack of evidence of the effective implementation of the process and its ability to add value, the strategy receives an average process rating. This translates to a neutral Morningstar Analyst Rating for the strategy.
Eastspring Investments Unit Trusts – Singapore Select Bond – Neutral
Patrick Ge, CFA
Eastspring Investments Unit Trusts – Singapore Select Bond boasts a seasoned duo with a long partnership history, but the appointment of its lead manager as the firm’s new head of Asian fixed income raises workload concerns. Lead manager Danny Tan has 22 years of investment experience and has led this strategy since its inception in 2011, building up a strong track record. Tan emerged as a confident investor who showed fluidity when discussing portfolio holdings at a meeting in May 2022. He is joined by longtime co-manager Wei Ming Cheong, who has 26 years of experience. investment experience. However, the departure of the head of the Asian fixed income team in May 2022 calls for caution, especially since she has been replaced by Tan. Tan’s increased workload and his level of involvement in this strategy are areas to watch. The investment approach combines top-down and bottom-up analysis and aims to maximize returns while providing investors with stable income, leading to a structural tilt towards credit. Corporate holdings consist primarily of SGD bonds with flexibility to invest up to 30% in non-SGD bonds, primarily USD Asian corporates, which are hedged to SGD. Although organized, the process is not distinct from its rivals. We launch the strategy with average people and process ratings, which earns a neutral Morningstar analyst rating across all equity classes.
Schroder International Selection Fund US Large Cap C – Bronze
Bhavik Parekh, CFA
Schroder ISF US Large Cap is led by Frank Thormann, with support from the global equities team and, in turn, the extensive analytical resources Schroders has to offer. This includes over 100 analysts located in 11 countries around the world, who provide extensive support for fundamental equity research. Managers effectively leverage this comprehensive resource via a team of 11 sector specialists tasked with identifying analysts’ best ideas. The process is generally focused on identifying well-established companies with underappreciated growth prospects, i.e. fundamental ideas, but they also make room for opportunistic, shorter-term actions, who may be in more cyclical activities. This process is well established and structured, and we expect stock selection to be the main driver of excess returns, as it has been so far under Thormann. We are launching a Morningstar Bronze analyst rating for the C clean share class. Other share classes range from Bronze to Neutral based on fees.
Stewart Investors Indian Subcontinent Sustainability B – From Gold to Silver
Our increased confidence in Stewart Investors’ distinct, proven and conservative investment approach to assessing the Indian Subcontinent Sustainability Strategy leads to an improved process rating to high from average. Its robust and well-codified investment framework has been applied consistently for almost three decades and sets it apart from its peers. Overall, this unique, long-term, absolute return-focused approach, coupled with strong implementation, has produced strong returns through market cycles. Lead Portfolio Manager – Sashi Reddy continues to impress us and is one of the strongest managers in the region. It’s backed by the highly regarded Sustainable Funds Group within Stewart Investors, which sports a top-notch investment culture, and the strategy continues to earn a high People rating. The Morningstar analyst rating of the cheapest B share class has been upgraded from Silver to Gold. The most expensive A-share class was also upgraded to gold from silver.
PineBridge Global Dynamic Asset Allocation Y – Neutral from the money
Matias Möttölä, CFA
We are downgrading the Morningstar analyst rating of PineBridge Global Dynamic Asset Allocation’s Y share class from Silver to Neutral. The strategy continues to be managed by a well resourced team led by the experienced Michael Kelly. Although the group has been largely stable, a senior member left in early 2021, and there have been role changes and moves with the more junior members of the team. This resulted in the East Asian offices becoming less important. The multi-asset group takes views on more than 80 asset classes, and we doubt the insights coming from PineBridge add enough value, as the implementation of the process has been disappointing. As a result, our People Pillar rating is downgraded to Average Above Average.
Reassessed from current review
Abrdn UK Ethical Equity I – Bronze from Under Review
Bhavik Parekh, CFA
Abrdn has announced that long-term lead manager Lesley Duncan will step down as portfolio manager of abrdn UK Ethical Equity in September 2022. Current assistant portfolio manager Rebecca Maclean will be promoted to lead manager. The continuity provided by Maclean and a robust process that we plan to continue under his leadership means that after a period of review, we are restoring the Morningstar Analyst rating of Bronze for the I and P1 treasury share classes. Other more expensive share classes get a neutral rating.
Morgan Stanley Investment Funds – Emerging Markets Corporate Debt Z – Neutral to Review
After a period of review, Morgan Stanley Emerging Markets Corporate Debt retains its neutral Morningstar Analyst Rating for Clean Share Class (Z), while some more expensive share classes are rated negative. In July 2022, Morgan Stanley announced that Warren Mar, head of corporate debt strategy in emerging markets and the fund’s lead manager since 2012, would retire at the end of the year. Effective July 2022, Budi Suharto, who joined the team in 2014 as a corporate credit analyst and was promoted by Mar to co-manager by the end of 2019, became senior manager. Mar’s retirement also coincided with a reorganization of the team. Following the integration between Eaton Vance and Morgan Stanley Investment Management, Akbar Causer, who previously managed emerging markets corporate bond portfolios at Eaton Vance, is taking over Mar’s role as head of the emerging markets corporate team. Emerging Markets. He was also appointed co-manager here to support Suharto. Our People Pillar rating remains unchanged at Average. Mar’s retirement leaves a void in terms of experience, but new senior director Suharto has been involved in strategy and has worked closely with Mar for several years. The reorganization of the team has also helped analysts, particularly on the sovereign side of emerging markets, where there is now a larger pool of local specialists.