New Ratings
Amundi ETF MSCI EM Latin America EUR A/I (ALAT) – Neutral
Monika Dutt
We do not have a strong conviction in this fund’s long-term investment proposition. The ETF tracks the MSCI Emerging Markets Latin America Index, which allocates 85% of its weight toward Brazil and Mexico, with the remaining 15% in Chile, Colombia, and Peru. In the Latin America equity market, active managers have shown an ability to add value by tilting toward higher-quality mid-cap stocks. While the fund’s low fee should contribute positively to its long-term risk-adjusted returns relative to category peers, its structural disadvantage, that is its inability to move down the cap spectrum to find value, limits its Morningstar Analyst Rating to Neutral.
HSBC GIF Frontier Markets – Neutral
Ronald van Genderen
In just over two years, this fund lost its two portfolio managers. First, Andrew Brudenell left in August 2015. He had managed this fund since June 2006 and had been joined by Christopher Turner in 2012. In November 2017, HSBC announced that Turner also left the team. With the departures of Brudenell and Turner, the fund lost two very experienced portfolio managers. The fund is now managed by Ramzi Sidani, who joined in June 2016 and had served as head of asset management at SHUAA Capital before joining HSBC. Turner has been replaced by Talib Saifee, who had joined the team in early 2017 as a dedicated analyst but later that year got promoted to portfolio manager. We consider the team to be small, but it can tap into various sources of support. We like the approach, which has been kept unchanged, is broad-based, and will likely be less prone to structural country biases that are inherent in publicly available frontier-markets indexes. Finally, the fund is priced just below the category median.
iShares Developed Real Estate Index – Silver
Kenneth Lamont
This new rating is supported by our positive view of the underlying index. The FTSE EPRA/NAREIT Developed Index provides cap-weighted exposure to REITs and listed real estate companies listed in developed countries globally. It is broadly diversified and representative of the global indirect property Morningstar Category and has proven to be hard to beat by active managers. With an ongoing charge of just 0.20%, the clean D share class of the fund is also among the cheapest in the Morningstar Category. Given its broad, representative sector exposure and rock-bottom fees, we can be confident that over a full market cycle this fund will continue to outperform the category average on a risk-adjusted basis.
Janus Henderson UK Absolute Return – Bronze
Randal Goldsmith
This SICAV is managed in an identical way to the Henderson UK Absolute Return Fund, which has a Morningstar Analyst Rating of Bronze. The only difference between the two vehicles is that the SICAV is fully hedged back to EUR. The long-short equity strategy applied to the fund has proved effective over 14 years and we like the lengthy investment experience of its managers Ben Wallace and Luke Newman.
Upgrades
iShares MDAX ® (DE) - Bronze
Dimitar Boyadzhiev
We have upgraded the fund’s Morningstar Analyst Rating to Bronze from Neutral to reflect our higher level of conviction that the fund will beat its category peers over the long term. The fund’s portfolio is adequately diversified at the stock level and representative of the opportunity set available to active managers in the category. Despite being more cyclically-oriented than the average peer, the fund holds more profitable and financially-stable companies. Finally, its price is competitive relative to active peers.
Downgrades
AXA Framlington UK Select Opportunities – Silver
Simon Dorricott
While we still have high regard for the extremely experienced Nigel Thomas, some decision-making and portfolio-construction issues have, in combination with a slightly unstructured research approach compared with peers, marginally reduced our level of conviction. However, the fund still receives one of our most positive ratings, and, as a result, we believe there remains the potential for outperformance of the index and peers over the longer term.
