Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: Invesco European Growth Equity, Loomis Sayles U.S. Equity Leaders and Schroder Global Emerging Markets 

Morningstar Analysts 27 September, 2016 | 10:28AM
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New Coverage

Invesco European Growth Equity – Silver

Francesco Paganelli

This fund is the Luxembourg-domiciled clone of the US-sold fund Invesco European Growth AEDAX, which has also a Morningstar Analyst Rating of Silver. We think this offering stands out among its Europe large-cap blend peers. The managers have three elements on their side: They have many years of experience, they've been working together as a team for more than a decade, and they stick with the same process that's proved successful here and at sibling funds. The fund’s three-, five-, and 10-year returns through Aug. 31, 2016, all lie in the top quartile of its Morningstar category. While it is relatively more expensive than the category median, we have strong conviction in it overall.

Loomis Sayles U.S. Growth Equity – Silver

Lena Tsymbaluk

We are initiating coverage for the Lux-domiciled Loomis Sayles U.S. Growth Equity fund with a Morningstar Analyst Rating of Silver. This is in line with the existing rating for the strategy’s UK-domiciled vehicle Loomis Sayles U.S. Equity Leaders, which has a longer track record. The manager, Aziz Hamzaogullari, has been successfully using the same process with largely the same analyst team since 2006, initially at Evergreen and since 2010 at Loomis Sayles. Through the proprietary bottom-up research framework, he looks to invest in the high-quality businesses with sustainable competitive advantages and profitable growth when they trade at a significant discount to intrinsic value. We have a high opinion of the manager’s experience in US equities and his disciplined, research-intensive approach, which has provided investors with a favourable risk/return profile over years. The fund therefore earns a Silver rating.

Upgrades

Loomis Sayles U.S. Equity Leaders – Silver

Lena Tsymbaluk

We have upgraded the Morningstar Analyst Rating of the Loomis Sayles U.S. Equity Leaders fund to Silver. The fund previously held a Bronze rating. The manager, Aziz Hamzaogullari, has been successfully using the same process with largely the same analyst team since 2006, initially at Evergreen and since 2010 at Loomis Sayles. Through the proprietary bottom-up research framework, he looks to invest in the high-quality businesses with sustainable competitive advantages and profitable growth when they trade at a significant discount to intrinsic value. We have a high opinion of the manager’s experience in US equities and his disciplined, research-intensive approach, which has provided investors with a favourable risk/return profile over years. The fund therefore earns a Silver rating.

Re-Assigned From Under Review

Schroder Global Emerging Markets – Bronze

Lena Tsymbaluk

This fund's rating was previously Under Review due to a change in the management team. Prior to that it held a Bronze rating. Allan Conway, head of the emerging markets team and the architect of the process, retired in August 2016. Tom Wilson, who has been part of the team for more than a decade, has become head of emerging markets. Wilson’s key responsibilities will include monitoring of the process implementation, chairing the strategy meetings and managing the team. The process is unchanged and stock selection will continue to be the responsibility of the three emerging-markets managers, Robert Davy, Waj Hashmi and James Gotto,  who have been part of the team working alongside Conway for more than 10 years. Given the team-based approach here and stability of the wider management team, we have reinstated the Bronze rating.

Schroder ISF Emerging Markets – Neutral

Lena Tsymbaluk

This fund's rating was previously Under Review due to a change in the management team. Prior to that it held a Bronze rating. Allan Conway, head of the emerging markets team and the architect of the process, retired in August 2016. Tom Wilson, who has been part of the team for more than a decade, has become head of emerging markets. Wilson’s key responsibilities will include monitoring of the process implementation, chairing the strategy meetings and managing the team. The process is unchanged and stock selection will continue to be the responsibility of the three emerging-markets managers, Robert Davy, Waj Hashmi and James Gotto, who have been part of the team working alongside Conway for more than 10 years. While we appreciate the team-based approach here and stability of the wider management team, the fund’s fees are high. Given this is a benchmark-aware strategy, we believe this reduces the potential for future outperformance. This warrants a Neutral rating.

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.

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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
Invesco Social Progress C-Acc Shares EUR38.43 EUR0.16
Loomis Sayles US Growth Eq I/A USD322.48 USD-1.40Rating
Natixis Loomis Sayles US Eq Ldrs N/A £623.59 GBP0.17Rating
Schroder Global Emerg Mkt Z Acc1.07 GBP-0.19Rating
Schroder ISF Em Mkts A Acc USD17.20 USD-0.62Rating

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