New Ratings
iShares Edge MSCI USA Value Factor – Bronze
Dimitar Boyadzhiev
The iShares Edge MSCI USA Value Factor ETF offers a low-cost and reasonably diversified approach to deeper-value US stocks. The fund’s ongoing charge of 0.20% is amongst the lowest in its category. Its benchmark, the MSCI USA Enhanced Value Index, is a solid value index strategy that adopts the market’s sector weightings and targets the cheapest stocks within each sector, limiting its holdings to a fixed number of 150 US large and mid-cap stocks. However, relative to its category peers, the fund has taken greater risk. Besides, the fund has a short record tracking its current index and has yet to prove its worth over longer periods.
Pyrford Global Total Return – Silver
Randal Goldsmith
Pyrford uses a basic asset allocation approach between equities, government bonds and cash, duration management, currency positioning and security selection to deliver its objective of stable real returns. We like the experience and stability of Pyrford’s investment team, and the clear and transparent investment approach in use, which has proved effective over a period exceeding 20 years.
Robeco QI Global Conservative Equities – Bronze
Jeffrey Schumacher
This quant strategy is developed and managed by an experienced, large, and stable team of portfolio managers and quant researchers. The strategy exploits the low volatility anomaly by using a time-tested and distinctive proprietary quant model. The strategy mainly seeks low-risk stocks as measured by their volatility and distress metrics, but valuation and momentum factors are also taken into account. The robust and repeatable process has led to a strong track record since inception. Over the past five years to January 2017, the fund has largely outpaced its peers as well as the MSCI ACWI Index with less volatility and smaller drawdowns. The fund’s low fees are another attractive feature.
UniGlobal - Equities Emerging Markets – Silver
Mathieu Caquineau
We think Uni-Global Equities Emerging Markets is a strong choice for investing in global emerging markets equities with lower risk than some peers. The investment process blends strong quantitative optimisation techniques with fundamental risk assessments to produce a diversified portfolio with low volatility and reduced drawdowns compared with the broad market. The strategy is constantly being fine-tuned with the aim of better identifying and controlling risks such as valuation risk and interest-rate sensitivity. We appreciate the quality and depth of resources available to run this fund and other regional offerings. Under the leadership of Alexei Jourovski since 2010, the team has gradually been reinforced and now includes seven managers and eight analysts who implement the process in a very disciplined manner.
Downgrades
Legg Mason IF ClearBridge US Equity Income – Neutral
Fatima Khizou
While the fund continues to benefit from an experienced management team, despite the impending departure of Hersh Cohen, the returns delivered to fund holders here have been disappointing. The investment approach is centred on the identification of high quality stocks that exhibit lower volatility so as to provide investors with competitive risk-adjusted returns. However, through the fund’s life, volatility (as measured by the standard deviation) has been higher than the benchmark, resulting in a less compelling risk/return profile than many peers.
Ratings moved to Under Review
BGF Global Corporate Bond
Carlos Lucar
Following the news that Owen Murfin has stepped down from his role as the lead portfolio manager of this fund, we have placed the fund’s Morningstar Analyst Rating Under Review. Murfin had been at the helm of the fund and part of BlackRock’s global bond team since October 2007. Andreas Doerrenhaus has assumed the role of lead portfolio manager, effective March 17, 2017. Doerrenhaus is the head of global unconstrained strategies in Europe and is a comanager of BlackRock’s Absolute Return Bond and Fixed Income Global Opportunities funds. Prior to joining BlackRock in 2010, he was a credit portfolio manager at Deutsche Asset Management.
Murfin’s departure coincides with changes in the team structure--BlackRock has announced that the credit team led by Murfin within the Global Bond group will merge with a dedicated credit team led by Doerrenhaus. That said, the global bond team will continue to operate under the leadership of Scott Thiel, BlackRock’s deputy CIO for fundamental fixed income. We will be meeting with Doerrenhaus soon to discuss the changes to the team and their impact on the strategy, and we will update our take on the fund accordingly.
Keystone Investment Trust (KIT)
Peter Brunt
The Board has announced a planned change in portfolio manager for this fund. James Goldstone will replace Mark Barnett as its manager on 1 April 2017. Goldstone has worked alongside Barnett on UK equity strategies for the past five years and has been responsible for managing a UK equity pension fund since April 2014. We understand that Goldstone will be applying a similar approach to Barnett, but plan to speak with the incoming manager in the next couple of weeks to gain a better insight. Until then, the fund is placed Under Review.
