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Morningstar Fund Ratings: Weekly Round-up

Three funds are downgraded by Morningstar analysts in this week's fund rating round-up

Mathieu Caquineau, CFA 16 July, 2019 | 9:50AM

analyst rating

Downgrades

BGF European  - Neutral from Silver

Ronald Van Genderen 

We are reinstating the Morningstar Analyst Rating at Neutral for BGF European, which was rated Silver before being put under review. As of mid-June 2019, Nigel Bolton and Brian Hall have relinquished their responsibilities on this strategy.

At the same time, Stefan Gries has taken over at the helm. With around six years, we consider him to be still relatively short on portfolio management experience. Our overall conviction is further reduced because of the continuous turnover and restructuring of the team supporting him.

Since 2016, we have seen 10 people, including experienced professionals, leave the team, which currently has 19 analysts and portfolio managers. The current members are less senior overall and have been changing roles and responsibilities because of the team’s instability.

Adding to our reservations is the team’s workload. All members carry coverage responsibility and generate ideas for a wide range of European strategies, which differ in style, market cap, and strategy (long-only and long-short). Hence, we believe there is substantial workload, especially for senior members, which makes us question the team’s effectiveness.

A restructuring announced in June 2019 has further changed the setup of the research team, with manager and analyst responsibilities reshuffling again. Gries will be applying the same approach as used at BlackRock Continental European. The change in approach will result in a higher-conviction portfolio with a stronger growth tilt. The change in management and approach means that the strong long-term track record is no longer relevant.

BGF European Focus - Neutral from Silver

Ronald Van Genderen 

We are reinstating the Morningstar Analyst Rating at Neutral for BGF European Focus, which was rated Silver before being put under review. As with BGF European fund, Nigel Bolton and Simon Hunter have relinquished their responsibilities on this strategy and Stefan Gries has taken over. 

Our overall conviction is further reduced because of the continuous turnover and restructuring of the team supporting him. Since 2016, we have seen 10 people, including experienced professionals, leave the team, which currently has 19 analysts and portfolio managers. The current members are less senior overall and have been changing roles and responsibilities because of the team’s instability.

Adding to our reservations is the team’s workload. All members carry coverage responsibility and generate ideas for a wide range of European strategies, which differ in style, market cap, and strategy (long-only and long-short). Hence, we believe there is substantial workload, especially for senior members, which makes us question the team’s effectiveness.

A restructuring announced in June 2019 has further changed the setup of the research team, with manager and analyst responsibilities reshuffling again. Gries will be applying the same approach as used at BlackRock Continental European. The change in approach will result in a higher-conviction portfolio with a stronger growth tilt. The change in management and approach means that the strong long-term track record is no longer relevant.

Metropole Selection A - Bronze from Silver

Mathieu Caquineau

Metropole Selection's Morningstar Analyst Rating has been downgraded to Bronze from Silver. The fund still benefits from a solid and long-tenured investment team, but recurring weaknesses in stock-picking, particularly in the banking sector, have dented our conviction.

The team’s deep fundamental bottom-up research on banks has often been swept away by macro and political turmoil in the eurozone. Conditions are the same for everyone, and other value-oriented funds have done a better job in navigating such a market environment.

We still think the fund has potential, however. The troubles in financials have often overshadowed the team’s good stock-picking in other sectors. We believe this is demonstrating that the team and a consistent application of the process are still able to make a difference in the long term

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Mathieu Caquineau, CFA

Mathieu Caquineau, CFA  Senior Fund Analyst, Morningstar France

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