New Ratings
Fidelity Global Dividend - Bronze
Jeffrey Schumacher
Dan Roberts has 15 years of experience at managing equity income mandates and he has run this fund since its inception in 2012. Idea generation is primarily done by Roberts, leveraging on the broader resources available. The fund’s process looks well-structured and is based on a sound philosophy focused on generating a dividend-based total return. Roberts prefers quality companies with a high level of dividend sustainability that can grow their dividends. He applies a long-term focus, as evidenced by the fund’s low turnover rate. The portfolio is managed with conviction and is well-balanced in terms of styles, sectors, and regions, as well as from a dividend perspective. Security selection is key, and the fund has added value for investors in downturns.
GAM Star Japan Equity - Bronze
Ronald van Genderen
This fund is managed by a relatively small team of three members, but, with lead portfolio manager Ernst Glanzmann and co-portfolio manager Reiko Mito, it also houses a wealth of experience in the Japanese equity market. The fund has been managed according to the Japan Leaders strategy, which was developed by Glanzmann, since June 2015. However, the strategy first began in July 2008 as a 50% sleeve within Julius Baer Multistock - Japan Stock Fund. The disciplined approach is purely bottom-up and driven by fundamental research aiming for high-quality stocks. The portfolio of the fund is very concentrated, and a distinctive characteristic is the equal weighting of the positions. Since the current strategy was launched at this fund through the end of November 2017, the performance has been very strong, but also the longer-term track record of the strategy at Julius Baer Multistock - Japan Stock Fund was outstanding. Unfortunately, the fees of the fund are relatively high.
Upgrades
Comgest Growth Mid-Caps Europe - Silver
Mathieu Caquineau
The collaboration between the three fund managers is fairly recent, and we usually have higher conviction in managers with more tenure, but the shared strong investment principles and the backing of a larger team are very comforting. Like all other Comgest funds, this one is managed in a truly collegial way, whereby Eva Fornadi, Rebecca Kaddoum, and Alistair Wittet rely on a close-knit team that includes five other managers/analysts dedicated to European equities. They are part of one of the best European equity teams in the industry. The fund also benefits from the firm’s time-tested “quality growth” approach. In the long run, this approach has delivered strong risk-adjusted returns for investors.
iShares Developed Markets Property Yield ETF - Silver
Kenneth Lamont
We have upgraded this fund to a Morningstar Analyst Rating of Silver from Bronze to reflect a higher level of conviction in the strategy. The FTSE EPRA/NAREIT Developed Dividend+ Index provides exposure to global REITs and listed real estate companies that have been screened by their one-year forecast dividend yield. The constituents must have a forecast dividend yield of at least 2%, which arguably represents a low hurdle given the obligation for global REITs to maintain high dividend payout ratios. This fund is one of the top offerings in its category, despite charging a much higher fee than directly comparable alternatives. It offers broad and representative passive market exposure offered within a category in which active managers have struggled to add value.
L&G Global Real Estate Dividend Index - Silver
Kenneth Lamont
This low-cost fund is one of the stand-out offerings in its category. Despite its short live track record, it tracks an index that has showcased its strengths over extended periods when compared with rival active strategies. The FTSE EPRA/NAREIT Developed Dividend+ Index provides exposure to global REITs and listed real estate companies that have been screened by their one-year forecast dividend yield. The constituents must have a forecast dividend yield of at least 2%, which arguably represents a low hurdle given the obligation for global REITs to maintain high dividend payout ratios. With an ongoing charge of just 0.20%, the clean I share class of the fund is among the cheapest in the Morningstar Category. We also hold the index management team at LGIM in high regard and expect the fund to continue to track its benchmark closely. For these reasons we have upgraded this fund’s Morningstar Analyst Rating to Silver from Bronze.
Downgrades
Schroder MM Diversity - Neutral
David Holder
This is the lowest risk offering within Schroder's multi-manager suite of funds. The fund is managed by longstanding portfolio managers Marcus Brookes and Robin McDonald, who are inherently focused on capital preservation and limiting losses in down markets.
The offering has some merit for very risk-averse investors; however, the fees here significantly detract from returns and the fund has materially lagged its objective of CPI plus 4% under their tenure. Consequently, our conviction in future outperformance has diminished and we are lowering the fund's Morningstar Analyst Rating to Neutral.
Rerated from Under Review
Baillie Gifford Japan - Bronze
David Holder
In October 2017 Baillie Gifford announced that longstanding fund manager, team head and partner Sarah Whitley will be retiring in April 2018, at which time Matthew Brett will become portfolio manager and Praveen Kumar his deputy.
Continuity is a challenge for investors when a longstanding manager steps down, but we are encouraged by Brett’s appointment in concert with Kumar, along with the collegiate input from the wider team. The trust's focus is firmly on mid and small caps, which hasn’t previously been Brett’s natural focus given the size and liquidity constraints within the Japanese OEIC he manages. Further, there are nuanced differences between his and Whitley’s investment style.
In our opinion, even after Whitley’s retirement this strategy will remain an above-average offering with notable potential. We reflect this view by awarding the trust a Morningstar Analyst Rating of Bronze.
