Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: This week fund analysts reveal new ratings for BNY Mellon, Lyxor and Oppenheimer, and a downgrade for Schroder

Morningstar Analysts 18 April, 2018 | 8:57AM
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New ratings

BNY Mellon Euroland BondBronze

Niels Faassen

We have initiated coverage on BNY Mellon Euroland Bond. David Leduc served as the fund’s lead manager since its inception in 2003. He handed over day-to-day responsibilities to Brendan Murphy and Thant Han in late 2010 when he became Standish’s fixed-income CIO. Leduc is still involved with the fund through his macro inputs. With tactical allocations to off-benchmark sectors such as high yield, emerging markets debt, and securitised bonds, this fund has a broader opportunity set than most of its peers.

Typically, this out-of-benchmark exposure ranges from 0% to 25% of the portfolio’s assets. Overall, the process is attractive given its flexibility and sensible guardrails, and it is well matched to Standish’s investment capabilities. The fund’s flexible approach has served investors well over time; this is reflected in its compelling risk-adjusted results. The fund earns a Morningstar Analyst Rating of Bronze.

Lyxor STOXX Europe 600Gold

Dimitar Boyadzhiev

The Lyxor STOXX Europe 600 offers broad and well-diversified access to large, mid and small-cap stocks from developed European countries. With a fixed number of 600 stocks, the portfolio currently captures approximately 90%-95% of the stock universe.

Its rock-bottom ongoing charge of only 0.07% provides a competitive advantage over the long term and further supports our conviction in this fund’s ability to outperform its category peers over the long term. We have therefore awarded it a Morningstar Analyst Rating of Gold.

Oppenheimer Global EquitySilver

Natalia Wolfstetter

Oppenheimer Global Equity UCITS' seasoned team, consistent approach, and strong long-term risk-adjusted returns earn it a Morningstar Analyst Rating of Silver. This fund was launched in November 2016, but its identically managed US version, Oppenheimer Global, has a much longer track record. Rajeev Bhaman has built an enviable record in his 21 years at Oppenheimer. He has been on this strategy since 2004.

The manager’s preferred hunting ground is high-quality, innovative firms in industries with long-term structural growth. This high-conviction/low-turnover process can, at times, exhibit short-term underperformance. But investors have been well-rewarded with above-average risk-adjusted returns over the past decade.

PIMCO GIS Low Average Duration fundBronze

Mara Dobrescu

We have initiated coverage of the PIMCO GIS Low Average Duration fund with a Morningstar Analyst Rating of Bronze. This fund's flexible approach requires expertise across global fixed-income sectors and an attentiveness to risk. Managers Scott Mather and Jerome Schneider and the broader PIMCO complex have the resources and judgment required to succeed, making us confident that the fund can overcome its high fee hurdle.

Vanguard FTSE Developed Europe ETFGold

Dimitar Boyadzhiev

Vanguard FTSE Developed Europe ETF’s strategy is a broad and representative market index that offers comprehensive exposure to large and mid-cap stocks from the European developed market universe. Its portfolio aims to capture approximately 90%-95% of these countries’ market capitalisation.

The low ongoing charge of 0.12% provides a competitive advantage over the long term and further supports our conviction in this fund’s ability to outperform Morningstar Category peers over the long term. We have therefore awarded it a Morningstar Analyst Rating of Gold.


Schroder ISF Japanese Opportunities Fund Neutral

Don Yew

We have downgraded the fund’s Morningstar Analyst Rating to Neutral from Bronze. While we maintain our conviction in an experienced and skilful portfolio manager, we have concerns around the strategy’s rapid growth in assets under management, which amounted to $4 billion as of September 30 2017. Subsequently, the fund’s liquidity profile has worsened, and the average market capitalisation, as well as the number of holdings in the portfolio, has significantly increased.

It has also demonstrated signs of struggling with dabbling in the small-cap space, which has been a key feature of the strategy historically. Overall, given its capacity issues, we are cautious about the fund’s ability to outperform going forward.

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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