New Ratings
Dimensional Emerging Markets Core Equity - Silver
Monika Dutt
This fund's modest systematic style bets and cost-efficient implementation should continue to serve investors well over the long term, supporting its Morningstar Analyst Rating of Silver.
Dimensional US Small Companies - Gold
Monika Dutt
The DFA U.S. Small Companies fund is a market-cap-weighted fund that invests in small-cap U.S. stocks and sets out to avoid the most-expensive and least-profitable names in this market segment. The portfolio managers take a patient approach to trading to minimise transaction costs, which is especially important in the less-liquid small-cap space. Its low fee, and a broadly diversified portfolio that balances targeting stock style characteristics with trading costs, should give the fund an edge over its peers through a full market cycle.
Fidelity Index US – Gold
Monika Dutt
A low fee of 0.07%--one of the lowest among all S&P 500 funds and ETFs--and a soundly constructed and reasonably representative portfolio leave the fund well positioned to continue its long streak of producing superior risk-adjusted returns relative to its peers over the long haul, and underpin its Morningstar Analyst Rating of Gold.
HSBC Japan Index – Gold
Kenneth Lamont
We have initiated coverage of this fund with a Gold rating on the basis that it one of the best performing and lowest cost funds offering exposure to Japanese large-cap equities. The fund offers broad and representative cap-weighted exposure for a fraction of the median price in the Morningstar Japanese Large-cap equity category. This large cost advantage has contributed toward an impressive performance. The fund has comfortably outperformed its surviving category peers over five and ten years when ranked on a risk-adjusted basis. The magnitude and consistency of the outperformance allows us to remain confident that the fund will continue to outpace rival funds going forwards.
PIMCO GIS Diversified Income - Silver
Mara Dobrescu
In May 2016, PIMCO announced manager Curtis Mewbourne’s September 2016 retirement and added PIMCO group CIO Dan Ivascyn and mortgage specialist Alfred Murata—who together head up PIMCO Income—as comanagers alongside longtime team member Eve Tournier. The fund’s strategy, which centers around diversified global credit exposure, remains unchanged, and the adjustments to its management have been additive in our view. While the investment approach has a lot of moving parts, it has delivered topnotch results over the long term, and there’s reason to expect the current management team to continue to do well.
Downgrades
Dunedin Income Growth – Neutral
David Holder
The fund is managed by Ben Ritchie who has been involved here since March 2013, in his capacity of co-manager, and who was appointed lead manager in September 2016 when he replaced Jeremy Whitley. In addition Ritchie has succeeded Whitley as head of the pan European equity team at Aberdeen. The appointment of Ritchie in concert with the board’s ongoing focus has accelerated the nuanced change of investment approach, more mindful of a balance between income and long term capital growth, and which should lead to a more rounded and diversified portfolio. Ritchie has also been focused on ensuring that the sizeable pan European team is more effective in finding and incorporating higher conviction ideas into portfolios. While we view the evolution of the investment approach and efforts to increase the effectiveness of the research as positive steps, it remains relatively early days to judge their impact. We are also mindful that Ritchie is relatively unproven in managing funds and, in recognition of these observations, we are reducing our Morningstar Analyst rating from Bronze to Neutral.
Robeco Hollands Bezit – Neutral
Ronald van Genderen
After the benchmark change in January 2016 from the AEX Index to 50% AEX Index and 50% AMX Index, the mid-cap segment has become more important to the fund. Although both portfolio managers have sufficient investment experience, they are not fully dedicated to this strategy, and we are in doubt whether they will be able to add value in this segment. Especially within the mid- and small-cap segment, we see peers that are better resourced and that we hold in higher regard. Since the benchmark change, the performance of the fund has not been convincing, but the period to evaluate is still short. For now, a Neutral rating is a good reflection of our conviction in this fund.
SKAGEN Kon-Tiki – Neutral
Mathieu Caquineau
Changes in the team have weakened our conviction in Skagen Kon-Tiki, and we assign it a Morningstar Analyst Rating of Neutral. On June 12, 2017, Skagen announced that Kristoffer Stensrud, who has managed the fund since its launch in 2002, will step down. Even though Stensrud had gradually reduced his contribution in recent years, we think this is a loss for investors as he has been key in building this strategy and its long-term track record. This announcement comes after the departure of Erik Landgraff in April 2017 and the reassignment of Hilde Jenssen in October 2016 to a noninvestment role at Skagen. Going forward, the fund will be managed by Knut Harald Nilsson, who was Stensrud’s official co-pilot since 2014; Cathrine Gether; and a recruit, Fredrik Bjelland, who will start in August 2017. But the team has been reduced from five to three people and has lost experience. These changes also come at a challenging time from a performance perspective, with the fund generating poor results in recent years. We still like this distinctive contrarian value strategy, and Skagen is a respectable parent, but there are too many uncertainties for us to remain positive.
