New Ratings
Comgest Growth Mid-Caps Europe – Bronze
Mathieu Caquineau
This fund is managed by a team of three portfolio managers appointed in 2012 and in 2015. While their cooperation may be recent, the fund’s foundations are strong. Like all Comgest funds, this strategy is managed in a truly collegial way whereby the three managers rely on a close-knit team that includes five other experienced managers/analysts dedicated to European equities. The investment process reflects the firm's time-tested approach, one solidly geared to high-quality growth companies with a focus on small and mid-caps. The disciplined execution of this distinctive strategy has led to strong risk-adjusted returns in the long term.
Fidelity Asian Smaller Companies – Bronze
David Holder
In Nitin Bajaj we believe that this fund benefits from a high calibre fund manager backed by substantial regional resource. We consider his disciplined stock specific investment approach to be well executed and over the longer term we would expect this approach to add significant value for investors. We have a high regard for Bajaj and his consistency of approach, which is reflected in the impressive performance profile of both this fund and the Fidelity Asian Values investment trust that he manages in an identical manner. The overall merit of the proposition gives us a material level of confidence in the fund.
Downgrades
JOHCM Japan – Neutral
Peter Brunt
After an extended period of poor returns from 2013 to the end of October 2016, the fund is now behind its Topix TR benchmark and the Japan Flex-Cap category average over three and five years, and throughout McGlashan's tenure to the end of October 2016. With such a flexible and relatively concentrated bottom-up stock-picking approach, we expect the fund to experience periods of volatility over the short term, even relative to this category. Recent underperformance has been driven by an overriding macro call made in 2013, however. The managers positioned the portfolio in the belief that Abenomics would result in a strong cyclical upturn. As the market has rewarded other areas of the market, the managers now find themselves with a portfolio that exhibits clear value characteristics, which is a departure from its normal style profile. Indeed, where stock selection was historically the largest driver of returns, recent returns have been overwhelmed by style. While acknowledging the managers' experience, the drift in style has decreased our conviction in their implementation of the process.
Ratings Moved to Under Review
Pioneer Funds Euro Aggregate Bond
Pioneer Funds Euro Bond
Pioneer Funds Euro Corporate Bond
Pioneer Funds Global Aggregate Bond
Pioneer Obbl Euro a Distribuzione
Pioneer Investments announced on December 7 that Tanguy Le Saout, head of European fixed income, and Ali Chabaane, head of portfolio construction, have been suspended. This suspension follows an internal investigation that concluded Le Saout and Chabaane had allegedly acted against the commercial best interests of the firm by seeking to launch a competing asset-management company. We think the suspension is a serious event that warrants a reassessment of the funds' investment merit. As a result, we have placed the Morningstar Analyst Ratings of the above five funds under review. We will be meeting with the fixed-income team in due course and will continue to closely monitor the potential impact of these departures on the process and portfolio positioning of the funds.
