Morningstar Fund Ratings: Weekly Round-up

The latest round-up of Morningstar Analyst Rating changes, including an upgrade for Fidelity, iShares and Robeco funds and downgrades for Franklin, Insight and BNY Mellon

Bhavik Parekh 11 February, 2020 | 12:03PM
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gold silver bronze

Upgrades

Fidelity Asian Smaller Companies – Silver

Bhavik Parekh

We continue to view Fidelity Asian Smaller Companies in a positive light, based on the disciplined implementation of the investment process by experienced portfolio manager Nitin Bajaj, and the resources available to him through Fidelity’s large pool of analysts. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the clean Y share class is upgraded to Silver from Bronze. Other share classes range between Silver and Bronze.  

iShares Index Linked Gilt Index Fund (UK) – Bronze

Jose Garcia Zarate

The intrinsic high duration of the market of UK inflation-linked government bonds can make a passive approach fall short in some phases of the cycle. However, this is a classic buy-and-hold exposure in UK-centric portfolios, and so the compounding benefits of low fees add up over the long-term.  This is the key reason that supports an upgrade for the clean share class (D) of this index fund from Neutral to Bronze. 

Robeco QI European Conservative Equities – Gold

Ronald Van Genderen

Robeco QI European Conservative Equities’ talented team, well-defined process, and reliable performance pattern make it an appealing offering for investors. Our conviction in the team and process has not changed, with People receiving a pillar rating of Above Average and Process receiving High. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Ratings for its cheapest share classes, including the clean C share class, increase to Gold from Silver, while more expensive classes land at Silver.

Downgrades 

Franklin UK Mid Cap – Bronze 

Samuel Meakin

Incumbent lead manager Paul Spencer is set to retire from the industry later in 2020, with Richard Bullas assuming the role following a transition period that is currently in progress. Spencer and Bullas have worked closely together for a number of years--they took over the UK Smaller Companies strategy in 2012, successfully overhauling the approach to one more akin to that used on this product. Over time, Spencer became less hands on as his primary focus was on this UK mid-cap strategy, with Bullas taking day-to-day charge on small caps. The investment approach and its implementation remained stable throughout the transition on the small-cap strategy, and we expect similar this time around.

Bullas is well versed in the teamwide approach, having joined the team in 2000 and having managed the smallcap strategy since 2012. Spencer’s upcoming retirement will clearly represent a loss in terms of his significant experience and knowledge in the space. However, we retain conviction in the team given Bullas’s relevant prior experience, his working relationship with Spencer, and the support of the wider, close-knit UK desk. As a result, we continue to view the strategy’s prospects in a positive light, but with a slightly lower level of conviction. All share classes therefore earn a Morningstar Analyst Rating of Bronze (previously Silver).

Absolute Insight Equity Market – Neutral

Fatima Khizou

The recent changes to the overall investment team, combined with implementation issues, have lowered our conviction in this strategy. The Morningstar Analyst Rating for the B3p GBP share class is therefore downgraded to Neutral from Bronze. All other share classes are also now rated Neutral.

BNY Mellon Absolute Return Equity – Neutral

Fatima Khizou

The recent changes to the overall investment team, combined with implementation issues, have lowered our conviction in this strategy. The Morningstar Analyst Rating for the GBP S Acc share class is therefore downgraded to Neutral from Bronze. All other share classes are also now rated Neutral.  

Note: Under the enhanced Morningstar Analyst Rating different share classes of funds may have different ratings

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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About Author

Bhavik Parekh  is an analyst for Morningstar UK