Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: Royal London Index Linked, Jupiter UK Growth, Triodos Sustainable Bond and JOHCM UK Opportunities

Morningstar Analysts 20 March, 2017 | 11:54AM
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New Ratings

Royal London Index LinkedBronze

Carlos Lucar

Veteran government bond investors Paul Rayner and Craig Inches have comanaged this UK index-linked bond fund since 2009. They bring stability to the investment process, having worked together for almost a decade. This, along with their long-standing fixed-income market experience, underpins our positive view here. The fund aims to outperform the FTSE Index Linked All Stocks index over a market cycle.

To this end, the managers follow a disciplined investment process that combines in-house fundamental research and an assessment of market technicals, the latter being particularly relevant in the UK index-linked space. Overall, we believe the managers have the necessary experience and resources to effectively execute the process over a market cycle.


Jupiter UK GrowthNeutral

Simon Dorricott

Steve Davies became lead manager here in May 2015, having worked alongside the previous manager, Ian McVeigh, since 2007. He has good experience of conducting stock level analysis, but less in terms of portfolio construction and, unfortunately, this was highlighted in 2016, with extreme underperformance relative to peers and the index. Although we have seen variable returns from this strategy in the past, the extent of the underperformance in 2016 causes us to have concerns over portfolio construction under Davies; as a result, this reduces our confidence in his ability to outperform over the medium term.

Triodos Sustainable BondNegative

Niels Faassen

Triodos is responsible for screening countries and companies on sustainability criteria, while portfolio management is outsourced to Delta Lloyd’s credits and rates team. After the departure of several prominent portfolio managers, Delta Lloyd recently announced that Arnold Gast, the former head of corporate bonds, has also left the fund company. Persistent staff turnover on Delta Lloyd’s fixed-income teams and the fund’s strict investment mandate and sustainability criteria, which lead to a highly concentrated and relatively defensive portfolio, make for a poor offering in our view. We therefore lower the Morningstar Analyst Rating to Negative.

Under Review

JOHCM UK Opportunities

Samuel Meakin

J O Hambro Capital Management (JOHCM) has announced that John Wood, manager of the JOHCM UK Opportunities fund, is set to retire from the investment management industry at the end of Q3 2017.

Wood will continue to manage the fund as normal alongside co-managers Rachel Reutter and Michael Ulrich, who have worked on the team since 2012 and 2015 respectively, until the end of September as part of the transition process. After this point, Reutter and Ulrich will assume lead management responsibilities for the fund and the segregated mandates run to the same investment strategy. JOHCM has stated that the strategy will remain unchanged under Reutter and Ulrich. Neither of the pair has lead management experience on a mainstream UK equities mandate, although Ulrich managed the F&C UK Mid-Cap fund prior to joining JOHCM.

Given that Wood remains at the fund until end-September and JOHCM wish to keep the strategy unchanged, we do not see cause for immediate concern. However, the experience of Wood was a key factor underpinning our Silver rating. We will work quickly to assess the situation, but given the materiality of Wood to our rating, in the meantime, we are placing the fund’s Morningstar Analyst Rating Under Review.

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
JOHCM UK Opportunities B GBP Acc3.23 GBP0.50Rating
Jupiter UK Growth L Inc274.87 GBP0.51Rating
Royal London Index Linked M Acc124.20 GBP-0.32Rating

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