New Ratings
Lyxor MSCI India ETF C-EUR – Negative
Monika Dutt
We believe that the fund will continue underperforming its category peers over the long term. The ETF tracks the MSCI India, a market-cap weighted index that includes approximately 80 stocks and represents 85% of the Indian equity market. The index is broadly diversified at the sector and stock level, but highly concentrated in large-caps. By moving further down the cap spectrum and screening for higher-quality stocks, active managers in the Morningstar India Equity category have been able to add value over the MSCI India benchmark. The ETF’s risk-adjusted returns ranked in the bottom quartile on a 3-, 5- and 10-year basis relative to surviving active and passive funds in the India equity category. With an ongoing charge of 0.85%, the Lyxor MSCI India is also the most expensive ETF in the category.
Upgrades
Artemis European Opportunities – Silver
Samuel Meakin
Co-managers Mark Page and Laurent Millet have forged a solid dynamic over time, with each brining complementary skills to the table; their partnership underpins our conviction here. The investment process is similar to that which Page employed with success at LV= Asset Management prior to joining Artemis and, in our opinion, it is robust and repeatable. Furthermore, the managers have demonstrated consistency in its application, both in market conditions that are well-suited to the approach and in those that are less favourable. Evidence of this consistency, coupled with the managers’ strong stock-level analysis and thoughtful consideration of the wider market environment, has served to increase our conviction in this offering.
Xtrackers II Eurozone Government Bond ETF (DR) 1C – Gold
Jose Garcia-Zarate
We have upgraded the Analyst Rating for this Xtrackers ETF from Silver to Gold. The Eurozone government bond market is highly liquid and opportunities to add value over a standard benchmark have been severely curtailed. An all-issuer, all-maturity and low-cost index-tracking approach has become the default investment option. Risk-adjusted returns for passive funds in this Morningstar category have consistently ranked in the first quartile over short and multi-year periods. From inception until September 2016 the ETF employed synthetic replication and the management was outsourced. It now follows physical replication and the management is done in-house by Deutsche Asset Management. We are satisfied that the transition has been smooth and has not had any impact on the ETF’s tracking ability. For this reason, the fund is now deserving of our highest accolade.
