Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: This week Morningstar analysts reveal a new rating for Invesco, and seven Kames bond fund ratings have been placed under review

Morningstar Analysts 4 December, 2018 | 7:26AM

New Ratings

Invesco Global Income – Bronze

Barbara Claus

We have initiated coverage of Invesco Global Income with a Morningstar Analyst Rating of Bronze. While the track record of the fund since November 2014 is not the longest, we think that it is an attractive choice for income-oriented investors. Our conviction is mainly based on the accomplished managers of the bond sleeve. Below-average fees add to the fund’s appeal.

Funds Placed Under Review

Kames Absolute Return Bond

Kames High Yield Bond

Kames High Yield Global Bond

Kames Investment Grade Bond

Kames Investment Grade Global Bond

Kames Ethical Corporate Bond

Kames Sterling Corporate Bond

Louise Babin

Kames Capital announced on 30 Nov 2018 four departures from its fixed-income team, with immediate effect. Stephen Snowden is leaving his position as co-head of fixed income; he was a named portfolio manager on a number of investment-grade corporate-bond funds and a key member of the investment-grade team.

The head of high-yield bonds, David Ennett, who joined the team from Standard Life Investments in 2016, is also departing, along with Stephen Baines, who comanaged Kames High Yield Bond and Short Dated High Yield Global Bond funds. Juan Valenzuela, who was a member of the rates team, is also leaving the company. The team is going to Artemis.

As expected, given the co-portfolio manager structure employed at Kames, most of the funds the four were responsible for have been taken over by a remaining comanager, and new comanagers have been announced--though these are primarily more-junior members of the teams. Kames Absolute Return Bond, which was previously managed by Snowden and Colin Finlayson, will be managed by Finlayson and Rory Sandilands. Kames Investment Grade Bond and Investment Grade Global Bond funds were comanaged by Snowden and Euan McNeil; Grace Le will now join McNeil as comanager on those funds.

Kames Strategic Bond and Strategic Global Bond funds were managed by Juan Valenzuela and Alex Pelteshki; following Valenzuela’s departure, Pelteshki will be joined by Finlayson. Departing managers David Ennett and Stephen Baines comanaged the Kames High Yield and Short Dated High Yield Global Bond funds, and these will now be run by Jack Holmes and Mark Benbow. Benbow will also replace Ennett as comanager alongside Holmes on the Kames High Yield Global Bond fund.

These changes follow a period of significant upheaval within the fixed-income team at Kames Capital, with heavy personnel churn across all levels of seniority and fixed-income subsectors over the past three years. The most high-profile departures prior to this announcement were heads of fixed-income David Roberts and Phil Milburn on August 2017, though notably former head of rates John McNeill and experienced investment-grade credit analyst Paul Dilworth also departed earlier in 2018.

Such a high level of staff instability is a concern, as the extensive experience of the portfolio managers and analysts of the team had previously been a key driver of the funds’ long-term success. We are placing the Morningstar Analyst Ratings of Kames Investment Grade Bond, Investment Grade Global Bond, High Yield Bond, High Yield Global Bond, and Absolute Return Bond funds under review whilst we assess the impact of the changes.

AXA WF Framlington Global Convertibles

Mara Dobrescu

AXA IM has announced that the lead portfolio manager of AXA WF Framlington Global Convertible Bond, Marc Basselier, is leaving the firm effective 1 Dec 2018. Basselier will join rival firm Union Banque Privée as head of convertible bonds.

Basselier has two decades of investment experience; he built a strong track record on a European convertible-bond fund at AXA IM from 2002 to 2010 before launching this fund in 2010. His experience was a key driver of our conviction in the fund, given the fact that the resources dedicated to convertible bonds at AXA IM are slim and have been unstable over the past five years.

Two of Basselier’s former comanagers moved to different roles in the organization in 2016. Only one of them was replaced, as Alexandre Fade, who has nine years of experience and previously worked as a portfolio engineer at the firm, was promoted to backup manager of this fund in 2016. Despite these limited resources, Basselier had so far successfully been able to leverage insights from AXA Framlington’s broader equity team, which made sense given the process’ focus on underlying equity drivers.

After Basselier’s departure, the fund will be managed by Alexandre Fade and David Shaw. Shaw joined AXA IM in 2016 as a North American equity specialist and deputy manager of AXA Framlington American Growth. He had so far been involved in sourcing US ideas for this global convertible bond portfolio, although he was not formally a comanager.

While the new portfolio manager duo can continue to rely on AXA Framlington’s group of five experienced global equity experts, as well as four additional regional equity managers, we are concerned by the lack of specific convertibles experience in the fund’s management team.

We are placing the fund’s Morningtar Analyst Rating Under Review whilst we assess the full impact of these changes.

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