Upgrades
HSBC GIF Euro Credit Bond – Silver
Mara Dobrescu
This fund boasts an experienced and stable team, employing an efficient investment process. Jean-Olivier Neyrat has managed this strategy since 2009 and is part of a team of 23 managers at HSBC, 14 of whom are dedicated to credit. The average level of experience in this team is close to 20 years,and its remarkable stability makes it, in our opinion, one of the strongest in the market.
While we continue to criticise the high costs charged to investors here, the fund’s seasoned team has demonstrated its ability to add sufficient value to overcome this hurdle over time. The fund’s Morningstar Analyst Rating is thus upgraded to Silver from Bronze.
Downgrades
iShares € Corporate Bond Large Cap ETF (IBCX) – Bronze
Jose Garcia-Zarate
Among passive funds that focus on the large-cap segment of the euro-denominated corporate-bond market, iShares Euro Corporate Bond Large Cap ETF tracks an index that is well diversified in terms of issuers and sectors. The focus on liquidity and size should prove valuable during market downturns, and over the long term, this exchange-traded fund can deliver returns in line or above the Morningstar Category average because of its competitive ongoing charge.
However, when it comes to passive funds, we prefer those that track broader benchmarks, as they are more representative of the underlying. For this reason, we bring this ETF’s Morningstar Analyst Rating down to Bronze from Silver.
iShares Core £ Corporate Bond ETF (SLXX) - Bronze
Jose Garcia-Zarate
This exchange-traded fund remains an interesting option for investors seeking a pure play on the market of pound-denominated corporate bonds. Most funds in the GBP Corporate Bond Morningstar Category tend to straddle into semi-government territory. As a result, relative to the category average, the ETF’s risk profile is higher. However, this is partly mitigated by the fact that the benchmark focuses on the larger and more-liquid issuers.
We retain the view that the ETF has an ability to outperform the category average over a full market cycle. However, there is no conclusive evidence that a pure play on the corporate bond market would produce consistently superior returns to existing Bronze-rated funds with a more-hybrid mandate. For that reason, we bring the Morningstar Analyst Rating for this ETF down to Bronze from Silver.
Fatima Khizou
M&G announced on November 9, 2017, that Aled Smith, manager of Global Leaders, has decided to step back from managing this fund from April 2018. Until then, we understand from the group that Smith will continue to be in charge of the portfolio’s day-to-day management with the support of deputy manager Gautam Samarth.
After this date, the fund’s make-up and how it is to be managed are unclear, as the group has yet to release any details about its plans for this strategy. Given the lack of clarity here, it is difficult to form any view on the future of this fund. We are also disappointed by how M&G has dealt with this upcoming change. Therefore, we have moved the fund’s Morningstar Analyst Rating to Neutral from Under Review.
