Morningstar Fund Ratings: Weekly Round-up

Biotechnology, China and bond funds are among this week's sweep of rating changes by Morningstar analysts 

Briegel Leitao 19 May, 2020 | 9:38AM

analyst rating

New Ratings

Xtrackers ESG MSCI USA (XZMU) – Bronze

Briegel Leitao

Xtrackers ESG MSCI USA offers a screened portfolio of US stocks from the wider MSCI USA universe. The strategy excludes laggards on several environmental, social, and governance metrics such as carbon emissions and controversial weapons. It is attractively priced and does a good job of offering a portfolio of stocks with good ESG credentials; however, investors are exposed to a small degree of single-stock concentration risk. This limits the fund to a Morningstar Analyst Rating of Bronze.

The fund’s index, the MSCI USA ESG Leaders Low Carbon ex-Tobacco Involvement 5%, offers large- to mid-cap exposure and consists of around 250 stocks, covering about 50% of the free-float adjusted market capitalisation of the US equity market. The methodology aims to maintain similar sector weightings to the parent non-ESG screened benchmark, the MSCI USA index, so as not to introduce excessive levels of active risk with the ESG screen. However, as single stocks are uncapped, the strategy ends up heavily overweighting single stock Microsoft, unduly exposing investors to single-stock concentration risk.

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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.

About Author

Briegel Leitao  is Associate Analyst of Passive Strategies at Morningstar UK

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