New Ratings
Vanguard Global Small Cap Index – Bronze
Dimitar Boyadzhiev
This fund is a pragmatic low-cost option to add a small-cap allocation to a diversified portfolio. The fund tracks a representative benchmark and Vanguard’s portfolio management team efficiently manages liquidity issues and delivers tight tracking. The ongoing charge of 0.38% is very competitive. Ultimately, however, the global-equity small-cap segment is one where highly experienced active managers can add value. We award this tracker a Morningstar Analyst Rating of Bronze.
Upgrades
BGF Euro Corporate Bond – Silver
Ashis Dash
The fund’s stable and experienced management team and their disciplined approach, backed by a strong and consistent track record, standout within its peer group, earning the fund’s Morningstar Analyst Rating an upgrade to Silver from Bronze.
Tom Mondelaers, a senior member of BlackRock’s highly regarded euro fixed-income team, has managed the fund since July 2009. He is backed by financials specialist Jozef Prokes, who has worked alongside him since 2010.
The managers seek to add value in a consistent, incremental manner through a broad range of primarily relative value strategies. This is reflected is the fund’s strong risk-adjusted returns under Mondelaers – the fund has outpaced both its Morningstar Category and its benchmark, the BofAML EMU Corporate Bond Index.
It also consistently ranked in the top half of its category in every calendar year since 2009. We think this reflects the quality of the team's ideas and the managers’ ability to blend these appropriately into a diversified portfolio.
Downgrades
BlackRock Continental European – Neutral
David Holder
Stefan Gries and Giles Rothbarth were appointed as co-managers in June 2017 when longstanding manager Vincent Devlin left BlackRock. Gries and Rothbarth use a bottom-up approach to unearth companies with medium- to long-term earnings power higher than that of the market, which is not factored into the share price. There is also an element of cognisance of macro and market themes. The outcome is a flexible portfolio of large- and mid-cap stocks.
The appointment of Gries and Rothbarth is promising for the fund, but they are relatively unproven in managing portfolios. Given the lack of experience, we feel it prudent to reflect this uncertainty in a Morningstar Analyst Rating of Neutral and we will continue to monitor developments.
BlackRock Greater Europe Ord – Neutral
David Holder
Stefan Gries replaced Vincent Devlin on this fund in June 2017. He will serve as co-manager alongside the established Sam Vecht. Gries will manage the majority of the fund’s assets, which are invested in continental Europe, while Vecht focuses on Emerging Europe.
Both managers have their own processes for their respective markets, which combine both top-down and bottom-up considerations, resulting in a high conviction, best ideas portfolio.
The appointment of Gries is promising for the fund, but he is relatively unproven as a primary decision maker. Given he has responsibility for the majority of the portfolio, we feel it prudent to reflect this uncertainty in a Morningstar Analyst Rating of Neutral and we will continue to monitor developments.
