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Fund Rating Upgrades, Downgrades and Initiations

Several funds and investments trusts have seen their Analyst Ratings undergo adjustments by Morningstar

Holly Cook 2 January, 2013 | 4:56PM

Closed-end Funds
Henderson Asian Growth Trust – Placed Under Review
Morningstar analysts have today placed their Analyst Rating for the Henderson Asian Growth Trust (HAGT) under review. The fund was previously rated Neutral. The change comes on the back of the news that the investment trust’s board is transferring the management of the fund from Henderson to Schroders. The board announced back in October that it was starting a consultation process on the fund’s future management.

"At Schroders, the fund will be run by Robin Parbrook and King Fuei Lee, both of whom are based in Hong Kong. Parbrook manages the open-ended Schroder ISF Asian Opportunities Fund, which is rated Bronze by Morningstar. King Fuei Lee runs the Bronze-rated Schroder ISF Asian Equity Yield fund. Together they co-manage the Schroder ISF Asian Total Return fund," Jackie Beard, Morningstar’s director of closed-end fund research commented. "We will be talking with the new managers about their plans for the management of HAGT."

Open-end Funds
Allianz Continental European – Initiated at Silver
Morningstar OBSR has awarded the Allianz Continental European fund a Morningstar OBSR Analyst Rating of Silver. Matthias Born and Thorsten Winkelmann have managed the fund since October 2010, having joined Allianz Global Investors in 2001 and assumed responsibility for the group’s growth strategies in October 2009. The fund invests in a diversified portfolio of investments in Continental European companies and benefits from an experienced management team and a predominantly bottom-up investment process that focuses on identifying quality growth companies. The investment approach is long-term and focuses on the growth of a company’s cash flows and profits and in so doing makes a distinction between structural and cyclical growth, with a focus on the former.

Franklin Mutual Shares – Downgraded to Neutral from Bronze
Morningstar OBSR has downgraded the Franklin Mutual Shares fund to a Morningstar OBSR Analyst Rating of Neutral. The fund previously held a Bronze Rating. The fund’s performance profile has been disappointing over recent years, in part due to the fund's value-biased style. This has led to consistent outflows over a protracted period of time, such that during 2012, the fund size fell to below £10 million. As a result, Morningstar OBSR believes that a Neutral Rating is a better reflection of its conviction at the current time.

Henderson European Selected Opportunities – Upgraded to Silver from Bronze
Morningstar OBSR has upgraded the Henderson European Selected Opportunities fund to a Morningstar OBSR Analyst Rating of Silver. The fund previously held a Bronze Rating. The fund manager, John Bennett, is Head of Pan European Equities and an accomplished investor, with nearly two decades of experience in European equities. He joined Gartmore in February 2010 to run this fund and transferred to Henderson upon its acquisition of the company. Mr Bennett has managed the fund throughout this time in a consistent and well-articulated manner, marrying the requirements of this benchmark-aware mandate with his higher conviction, longer-term approach to good effect.

Investec American – Downgraded to Neutral from Silver
Morningstar OBSR has downgraded the Investec American fund to a Morningstar OBSR Analyst Rating of Neutral. The fund previously held a Silver Rating before being placed Under Review due to a change in management and process. Thornburg Investment Management, who had been the sub-investment manager since September 2002, ceased managing the fund in August 2012. It is now co-managed by in-house managers Alastair Mundy and Mark Wynn-Jones according to the team’s contrarian approach. While Morningstar OBSR acknowledges that the new managers have experience applying the same approach across a number of mandates, they do not have a proven track record in a US-specific portfolio. Morningstar OBSR therefore believes a Neutral Rating is more appropriate reflection of its conviction in the fund’s relative merits at this stage.

Standard Life Investments European Equity Growth – Initiated at Bronze
Morningstar OBSR has awarded the Standard Life Investments European Equity Growth fund a Morningstar OBSR Analyst Rating of Bronze. It is managed by Jaime Ramos Martin, who is based in Edinburgh and has been in charge of the fund since October 2007. We believe that he has a robust and clearly articulated process, which is based upon the team’s approach of identifying changes that impact positively on a company’s growth potential and which in their view have been underestimated by the market.

UBS US Growth – Downgraded to Neutral from Bronze
Morningstar OBSR has downgraded the UBS US Growth fund to a Morningstar OBSR Analyst Rating of Neutral. The fund previously held a Bronze rating before being placed Under Review following a manager change. Going forward the fund will be managed by Messrs Sam Console and Peter Bye, who were previously an integral part of the US large-cap growth team under former manager Lawrence Kemp. Their primary focus was however on research and not portfolio management. Morningstar OBSR therefore believes that a Neutral Rating is a better reflection of its conviction in the fund at this stage.

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About Author Holly Cook

Holly Cook  is Managing Editor of Morningstar.co.uk