Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: This week fund analysts reveal new ratings for Alken, M&G, Lindsell Train and Standard Life Investments

Morningstar Analysts 19 June, 2018 | 2:52PM
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New Ratings

Alken Small Cap Europe - Silver

Mathieu Caquineau

Alken Small Cap Europe earns a Morningstar Analyst Rating of Silver. The fund benefits from a skilled team led by Nicolas Walewski, who has built a strong expertise in European small caps and mid-caps over the years. This is evidenced not only by the performance achieved on this strategy since 2010 but also by the excellent long-term track record of the firm’s all-cap fund, Alken European Opportunities, since 2006. The fund managers often take contrarian stances without paying attention to benchmarks. The resulting portfolio is intrepid, containing only around 50 stocks, with the top 10 holdings typically accounting for half of the assets. Such an approach is more aggressive than its peers, and it shows in its relative volatility. That said, over the long haul, the fund’s opportunistic and concentrated approach has paid off for investors, despite very high fees.

Lindsell Train Global Equity - Silver

Peter Brunt

Lindsell Train Global Equity is a standout choice for investors comfortable with a highly concentrated portfolio that can look markedly different from the MSCI World Index at the regional and sector levels. Lindsell Train co-founders Michael Lindsell and Nick Train apply their tried-and-tested investment approach to a global opportunity set. Both managers have more than 30 years' experience, including several years managing global equity portfolios prior to launching this fund in 2011. They are joined by comanager James Bullock; while less experienced, he has been contributing to the strategy since joining Lindsell Train in 2010. While less proven on this global product, we like the managers' clear investment philosophy and their disciplined and consistent approach. The fund is assigned a Morningstar Analyst Rating of Silver.

M&G Global Floating Rate High Yield - Bronze

Ashis Dash

We have initiated coverage of M&G Global Floating Rate High Yield with a Morningstar Analyst Rating of Bronze. The fund has been managed by high-yield specialist James Tomlins since its inception in September 2014. It is designed to provide income as well as defence against rising interest rates. It primarily invests in physical high-yield floating-rate notes globally, but Tomlins can also create synthetic floating-rate notes.

The investment approach is predominantly bottom-up, with Tomlins looking to add the most value through sector and security selection; duration is generally kept close to zero years. The fund’s low duration and its bias towards senior secured debt have held it back compared with conventional high-yield bond funds during credit risk rallies, but they have also driven its outperformance against investment-grade debt during periods when 10-year US Treasury yields rose more than 0.5%. Overall, we believe Tomlins’ experience running high-yield mandates and the support of M&G’s strong fixed-income resources make this a solid choice. 

M&G Pan-European Dividend Fund - Bronze

Jeffrey Schumacher

We initiate coverage on M&G Pan-European Dividend Fund with a Morningstar Analyst Rating of Bronze. We think the fund benefits from a distinctive, growth-oriented dividend philosophy, executed by a decent team under the leadership of fund manager Phil Cliff. Bottom-up stock research is key in the process, which concentrates on a company’s growth prospects, cash flow generation, capital discipline, and management quality.

The portfolio holds 30-40 stocks and consists of three buckets that have different characteristics: quality, assets, and rapid growth. Its portfolio typically resides in the blend column of the Morningstar Style Box, as opposed to the value column for many peers. Furthermore, the portfolio exhibits a tilt to cyclical sectors and mid-caps. The style of investing has led to a more volatile performance pattern relative to peers, but investors have been compensated for the risk.

SLI European Smaller Companies - Bronze

SLI Europe ex-UK Smaller Companies –  Bronze

Samuel Meakin

Andrew Paisley took the reins on this mandate in August 2014. He is an experienced small-cap investor; his investment career started in 1999, with the vast majority of it having been focused on smaller companies. The funds draw on the teamwide investment approach used by the Smaller Companies team at Aberdeen Standard Investments that has demonstrated investment merit across the team’s UK, European, and global mandates over time. We believe that Paisley has acclimatised well to the tried-and-tested approach since joining the team, and this, combined with his experience in smaller-companies investing, gives us sufficient conviction to award the funds an Morningstar Analyst Rating of Bronze.

Moved from Under Review

BGF India - Neutral

Germain Share

On May 7, 2018, BlackRock announced the sale of its DSP BlackRock joint venture, which left BGF India without the services of respected portfolio manager Anup Maheshwari and his 14-member investment team. Management of BGF India will be transitioned to Sidharth Mahapatra, who will join the team in July 2018. He has over 20 years of investment experience, including a solid track record during his 12 years of managing Indian equities at Amundi. While we think he is a sensible appointment, he won’t have the resources Maheshwari had. Mahapatra will be supported by a senior and an impending junior India research analyst, which is part of BlackRock’s 38-member Asia and Global Emerging Markets team.

We expect Mahapatra to adopt the team’s flexible process, though we have yet to see how he will execute it after he comes on board, especially given that he followed a more consistent growth style at Amundi. It will also likely take time for Mahapatra to integrate into the team and put his stamp on the portfolio. Because of these uncertainties, we downgrade the fund’s Morningstar Analyst Rating to Neutral from Bronze.


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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
abrdn Europe ex UK Smaller Comp P1 Acc404.90 GBP-0.15Rating
abrdnII-Eu SmlCo D Acc EUR44.21 EUR0.10Rating
Alken Small Cap Europe R342.18 EUR1.48Rating
BGF India A258.07 USD-1.01Rating
Lindsell Train Global Equity B GBP Inc4.43 GBP-0.42Rating
M&G Global Fltng Rt Hi Yld GBP A-H Acc135.38 GBP0.12Rating

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