New Ratings
iShares Edge MSCI USA Multifactor ETF (IFSU) - Bronze
Monika Dutt
iShares Edge MSCI Multifactor USA ETF targets US stocks that have higher-than-average exposure to time-tested factors that have historically been associated with market-topping performance. By using an optimiser, the fund achieves stronger factor tilts than rival multifactor funds that combine single-factor indexes.
The fund's low fee and stringent risk management should contribute to its edge over the long run, but its short track record and opaque portfolio construction limit its Morningstar Analyst Rating to Bronze.
UBS ETF MSCI USA Select Factor Mix (USFMD) - Bronze
Monika Dutt
UBS ETF MSCI USA Select Factor Mix targets US stocks that have higher-than-average exposure to factors historically associated with market-topping performance, including value, momentum, buyback/shareholder yield, quality, low volatility, and size. The fund’s low fee of 0.30% should contribute to its edge over the long run, but its short track record limits its Morningstar Analyst Rating to Bronze.
Upgrades
Allianz Gilt Yield – Bronze
Ashis Dash
Mike Riddell took over as lead manager of Allianz Gilt Yield at the end of November 2015. He brings relevant UK gilts experience, having managed a number of funds at M&G since 2010, including M&G Gilt & Fixed Interest Income.
Riddell’s primary levers for adding value in this fund are its yield-curve and duration positioning and its exposure to any off-benchmark securities up to 20% of assets. Despite his short tenure here, his expertise within the gilt market and ability to use the fund’s various drivers to add value have increased our conviction.
Amundi ETF S&P 500 (500) – Gold
Monika Dutt
The gradual improvements in Amundi’s stewardship - now reflected in a Parent Pillar rating of Neutral, up from Negative - have paved the way for upgrading the Morningstar Analyst Rating for this fund to Gold from Silver. The merits of an index-tracking approach to this market are very compelling.
The S&P 500 is a soundly constructed, diversified, and representative index that has been difficult to beat by active managers. While this fund is not one of the cheapest passive offerings tracking the S&P 500, with an ongoing charge of 0.15%, it nonetheless stands as a superior investment proposition in the broad context of its Morningstar Category.
Artemis Monthly Distribution – Silver
Randal Goldsmith
The fund has two experienced managers, James Foster and Jacob de Tusch-Lec, who bring proven security selection skills from their individually rated Artemis Strategic Bond and Artemis Global Income funds while working together to ensure a meaningful and regular monthly income distribution. We also like the competitive pricing of this product and that the relatively small fund puts no capacity constraint on their best ideas across the cap scale.
Fidelity Asia Focus – Silver
Mark Laidlaw
We believe this strategy has what it takes to be amongst the best in class when it comes to Asian equities. Central to the thesis is portfolio manager Dhanajay Phadnis. He joined Fidelity in 2004 as an analyst, following the typical Fidelity career path and initially came to our attention as manager of Silver-rated Fidelity Indonesia. He took control of this strategy in early 2015, stepping into the shoes of Fidelity veteran Alan Liu. Phadnis has handled the step up well, displaying a level of assuredness we’ve come to expect from more seasoned investors.
The process is detailed, with a preference for firms with a high and sustainable return on equity, strong management and alignment alongside minority investors. The returns have been impressive, relative to both peers and the index, and even more so on a risk-adjusted basis. Our conviction in the manager and his process has strengthened over time and we believe investors will continue to be well served here.
Downgrades
Jupiter Merlin Worldwide Portfolio – Neutral
David Holder
We rate the longstanding managers and investment process followed here highly. However, we feel that, as a fund of funds, its high relative charges are a structural headwind for the portfolio. We believe this limits its opportunity to outperform conventional global equities in what is a rapidly changing landscape in terms of ease and cost of access for investors. Accordingly, we have downgraded the Morningstar Analyst Rating to Neutral from Bronze.
