Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: Legg Mason Western Asset Asian Opportunities, Franklin Euro High Yield and Skagen Kon-Tiki

Morningstar Analysts 25 October, 2016 | 1:39PM
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New Coverage

Legg Mason WA Asian OpportunitiesNeutral

Don Yew

We have initiated coverage on Legg Mason Western Asset Asian Opportunities with a Morningstar Analyst Rating of Neutral. This fund is comanaged by Desmond Soon, Chia-Liang Lian, and Swee-Ching Lim; however, lead portfolio management responsibilities lie with Soon, who took over the lead role from Lian in May 2015. Soon offers deep portfolio management experience, and we are impressed by his solid knowledge of the Asian fixed-income markets. The investment process aims to deliver alpha across diversified sources—currency, rates, and credit--and the fund’s greater use of credit is a key point of differentiation from most of its peers in the category. While the investment process is sensible, we are still building conviction in Soon as the lead portfolio manager on this strategy, especially considering that he had been comanaging the fund only since April 2014.

Franklin Euro High YieldNeutral

Niels Faassen

We have initiated coverage on Franklin Euro High Yield with a Morningstar Analyst Rating of Neutral. Piero Del Monte has been managing this fund since February 2008 and has been active in European high-yield since 2003. Patricia O’Connor, based at Franklin’s headquarters in San Mateo, California, is also a named manager on this fund. There is extensive support from a global credit research team, which consists of 35 credit analysts. Despite this ample support, we remain to be convinced by the managers’ ability to apply the fund’s investment process effectively over time given its weak track record and above-average fees.

Downgrades

Skagen Kon-TikiBronze

Matias Mottola

We have downgraded the Skagen Kon-Tiki fund to a Morningstar Analyst Rating of Bronze. The fund was set Under Review on 12 Oct 2016 on news that lead manager Kristoffer Stensrud was stepping down from the leadership role and becoming a regular portfolio manager and that Hilde Jenssen was leaving the team without being replaced. Before the news, the fund held an Analyst Rating of Silver.

We think Kon-Tiki has an able lead manager in Knut Harald Nilsson, who has been at the fund since 2006 and was named co-lead manager in 2014, and we are somewhat comforted by the fact that Stensrud continues to help in stock-picking despite leaving portfolio construction duties behind. The changes slightly lower our conviction in the fund, especially as seen in the context of a worryingly high rate of change in Skagen’s portfolio management teams.

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
Franklin Euro High Yield A(acc)EUR21.08 EUR-0.17Rating
FTGF WA Asian Opps A USD Acc153.89 USD-0.20Rating
SKAGEN Kon-Tiki A1,250.52 NOK0.32Rating

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