Morningstar Fund Ratings: Weekly Round-up

ANALYST RATINGS: This week Morningstar analysts reveal a new rating for a BlackRock bond fund and a downgrade to an Invesco emerging market fund

Morningstar Analysts 30 October, 2018 | 7:03AM
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New Ratings

BGF Emerging Markets Local Currency Bond – Neutral

Mara Dobrescu

We have initiated coverage of BGF Emerging Markets Local Currency Bond with an Analyst Rating of Neutral. This fund’s team underwent wholesale change in mid-2012, following the recruitment of team head Sergio Trigo Paz and his team from FFTW. It has grown from seven members in 2012 to 20 currently, but the local currency outfit has seen some changes, which limits our conviction to an extent.

The managers have significant leeway to manage the fund’s currency exposure, but the magnitude of its recent underperformance, which owes to only a handful of currency trades and is at odds with the team’s cautious investment philosophy, raises some concerns on the effectiveness of risk controls.

Downgrade

Invesco Asian Equity – Bronze

Lena Tsymbaluk

Stuart Parks, lead manager of this fund and head of Asian equities at Invesco, is retiring in July 2019. William Lam and Ian Hargreaves will comanage this fund going forward, with Lam as the lead. Parks will continue to be actively involved in managing the fund until the end of December 2018.

The new managers have worked closely alongside Parks for more than 10 years as managers on the Asian equities team. Lam is currently responsible for the UK-domiciled Invesco Asian UK fund and is looking to bring the portfolio of Invesco Asian Equity in line with this, with the exception of Australia exposure.

The comanagers intend to use the same long-term, fundamentally driven approach used by Parks and the team. There is a top-down element to the process, and Parks used to be responsible for additional macro research, which is going to be undertaken by Ian Hargreaves and Tim Dickson from now on. That said, Lam’s investment style is more bottom-up and contrarian compared with Parks’.

While this reduces the importance of the macro element, we feel it is a component that drives some decisions. So, reflecting the loss of Parks’ input here and his three decades of Asian equities experience, we downgrade the fund one notch to a Morningstar Analyst Rating of Bronze from the rating it held prior to being placed Under Review.

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
Rating
BGF Emerging Markets Lcl Ccy Bd D225.79 USD0.17Rating
Invesco Asian Equity Z USD AD18.09 USD-1.19Rating

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