New Ratings
MS INVF US Advantage - Silver
Jeffrey Schumacher
Our conviction is based on the experience and stability of the team led by Dennis Lynch and the investment culture he has fostered. Furthermore, the team has implemented a long-term, high-conviction approach successfully, looking for companies with defensible business models that dominate their markets or benefit from a strong competitive advantage. Lynch and team are willing to go wherever their research takes them and consequently pay little attention to the benchmark's sector weightings. They're also willing to take concentrated positions in their best ideas to help the fund get ahead. The fund has delivered above-average returns and has kept its risk levels in check.
Nedgroup Investments Global Flexible – Gold
Barbara Claus
Since May 2014, Nedgroup Global Flexible is managed externally by FPA, an US-based investment boutique. Steve Romick owns the strategy’s excellent record since its 1993 inception in the fund’s US domiciled sibling FPA Crescent, but he's had the help of comanagers Brian Selmo and Mark Landecker since 2013. This fund ranges across asset classes, market caps, sectors, geographies, and public and private markets in pursuit of equity-like returns with less risk, a hurdle they have far exceeded since inception of their strategy. The managers' experience, patience and independent investing style make this fund an appealing option.
Upgrades
Invesco Asian Equity – Silver
Lena Tsymbaluk
Invesco Asian Equity benefits from the experience of seasoned investor Stuart Parks, who has successfully managed this fund for 20 years. He is supported by a close-knit team of three additional managers and two analysts, which has grown with the strategy. The manager uses a pragmatic approach to Asian equity investing, combining top-down with bottom-up fundamental analysis. Parks switches between growth and value styles depending on the prevailing macro environment, while he also assesses country and sector attractiveness.
While macro calls can be difficult to get right consistently, the approach has proved successful over different market cycles, adding value from both top-down and bottom-up analysis. We believe the fund stands as a superior investment proposition within the Asian equity peer group and have therefore upgraded its Morningstar Analyst Rating to Silver.
Robeco Global Consumer Trends – Silver
Jeffrey Schumacher
A distinctive concept, solid execution, and a knowledgeable team have resulted in an above-average track record; therefore, Robeco Global Consumer Trends Equities deserves an upgrade to a Morningstar Analyst Rating of Silver from Bronze. This fund has a broader mandate and can play a variety of trends within the consumer sector. The portfolio is concentrated around three buckets: the digital consumer, emerging consumer, and strong brands. It results in a strongly growth-oriented portfolio with above-average emerging-markets exposure, where high-quality names and exposure to strong brands are balancing components.
The fund has outperformed many of its peers and its benchmark over various periods on a risk-adjusted basis. However, investors should not underestimate the risks involved, and its distinctive character can put it out of step with the category.
Downgrades
LF Woodford Equity Income – Bronze
Peter Brunt
While Neil Woodford is broadly targeting the same kind of opportunities as those of his Invesco Perpetual days, there is a greater exposure to stocks found at the lower end of the market-cap scale and to unquoted companies. The bias to the former has become far more pronounced over the past couple of years, in part as a result of Woodford's more positive view on the UK economy since first-quarter 2017. While the group has shown its ability to meet sizable redemptions over the past year, with the fund still standing at over £6 billion, such extreme positioning in less-liquid parts of the market make it less nimble than competitors.
A number of high-conviction holdings have also experienced stock-specific problems over the past couple of years. While contrarian investing comes with a degree of risk and issues could be expected from time to time, the nature of some of the problems and respective position sizes in the portfolio give us cause for concern. As a result, while we believe that the fund still has long-term investment merit, our conviction has waned, seeing the Morningstar Analyst Rating lowered to Bronze.
