Morningstar Fund Ratings: Weekly Round-up

Our weekly round-up of changes to funds' Morningstar Analyst Ratings includes four upgrades and four downgrades

Jeffrey Schumacher 14 July, 2020 | 9:00AM
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Upgrades

Fidelity Global Dividend (SICAV) – Silver from Bronze

Jeffrey Schumacher

A talented manager combined with a sensible and well-executed process are driving our conviction in this strategy. While the People and Process Pillar scores remain unchanged at Above Average, our enhanced ratings framework, which places a greater emphasis on fees and expected benchmark relative performance, leads to an upgrade of the Morningstar Analyst Rating for its clean Y-Acc USD share class to Silver from Bronze. More expensive share classes land at Bronze or Neutral.

Fidelity Global Dividend (OEIC) – Silver from Bronze

Jeffrey Schumacher

A talented manager combined with a sensible and well-executed process are driving our conviction in this strategy. While the People and Process Pillar scores remain unchanged at Above Average, our enhanced ratings framework, which places a greater emphasis on fees and expected benchmark relative performance, leads to an upgrade of the Morningstar Analyst Rating for its clean W share classes to Silver from Bronze. More expensive A share classes land at Bronze.

Invesco FTSE RAFI US 1000 ETF – Silver from Bronze

Briegel Leitao

Invesco FTSE RAFI US 1000 ETF breaks the link between market prices and portfolio weightings. Stocks are assessed and weighted on multiple fundamental measures, and this injects a disciplined rebalancing approach that should give the fund a long-term edge over its peers. This is a sensible value strategy, although at times it may have an overweighting in stocks with deteriorating fundamentals. In addition, with an ongoing charge of 0.39%, the fund is more expensive than several of its index peers, limiting its Morningstar Analyst Rating to Silver. This fund uses full physical replication to capture the performance of the FTSE RAFI US 1000 Net Return Index. The fund owns all the underlying constituents in the same proportion as its benchmark to the extent that is possible and efficient. This fund does not engage in securities lending.

Jupiter UK Special Situations – Gold from Silver

Robert Starkey 

An experienced manager combined with a strong process earns Jupiter UK Special Situations I share class a Morningstar Analyst Rating of Gold based on favourable fees in our enhanced ratings framework, with the remaining share classes retaining Silver. A growing team is noted and seen in a positive light. While short-term performance during H1-2020 was disappointing, we continue to believe that the strategy will deliver performance to patient investors.

Jupiter Income Trust – Silver from Bronze

Robert Starkey 

An experienced manager combined with a strong process earns the Jupiter Income Trust I and Z share classes a Morningstar Analyst Rating of Silver based on favourable fees in our enhanced ratings framework, with the remaining share classes retaining Bronze. With less experience in spearheading an income mandate, the People pillar is held back from a High rating, like that of the UK Special Opportunities strategy, but we note the growing team and it is seen in a positive light. While short-term performance during H1-2020 was disappointing, we continue to believe that the strategy will deliver performance to patient investors.

Downgrades

Centifolia - Bronze from Silver

Samiya Jmili

Value-driven Centifolia has long been a strong offering for investors seeking exposure to the large -cap French equity market. The fund’s main strength lies with its experienced and nimble lead manager Jean Charles Mériaux who has been at the helm of this strategy since inception in 2002. However, uncertainties regarding his future involvement with Centifolia after the completion of DNCA’s take-over by Natixis AM and a lack of clarity on his succession plan as he reached retirement age urge caution. This justifies a downgrade of the People Pillar score from High to Above Average. As a result, all Centifolia’s share classes but for the cheapest S shares are downgraded from Silver to Bronze or Neutral ratings.

Eurose - Bronze from Silver

Samiya Jmili

Eurose has a cautious and high-conviction bottom-up approach, which has been consistently executed by its seasoned portfolio managers. Despite looming uncertainties around Jean-Charles Meriaux’s commitment in the future, we think the continuity provided by Philippe Champigneulle’s on-going leadership as well as the fund’s discipline and nimbleness in different market environments still warrant High and Above Average scores on People and Process, respectively. This results within our new ratings framework, which places a greater focus on overall costs, in the downgrade of the fund’s clean N share class from Silver to Bronze, while the more expensive C share class earns a Neutral rating.

JPM India - Neutral from Bronze

Samuel Lo

Rukhshad Shroff, the more senior and experienced of the two comanagers of the JPM India strategy, will retire on 31 July 2020 and be replaced by Ayaz Ebrahim, who will work with remaining comanager Rajendra Nair. Shroff has comanaged this strategy since 2003 and his contribution will be missed given his greater role in decision-making over the years, although he leaves the firm on the back of an extended period of underperformance and heavy outflows. Incoming comanager Ebrahim has 30 years of industry experience and joined the firm from Amundi in 2015. He has a mixed track record as a regional Asian equity manager, and we have yet to build conviction in him as an Indian equity manager.

We also need to time to observe the new team dynamics, where Ebrahim will focus on portfolio construction and leave stock selection to Nair. Ebrahim will also bring some changes to the strategy’s execution, such as a closer eye on sector concentration and increasing the number of portfolio holdings, although the exact changes and effectiveness are unclear at this stage. We have reduced both People and Process ratings to Average from Above Average on the back of our reduced conviction. As a result, the Morningstar Analyst Rating has been lowered to Neutral from Bronze across all the share classes of this Luxembourg-domiciled vehicle, including the clean share class C. 

JPMorgan India (JII) - Neutral from Bronze

Samuel Lo

Rukhshad Shroff, the more senior and experienced of the two comanagers of the JPM India strategy, will retire on 31 July 2020 and be replaced by Ayaz Ebrahim, who will work with remaining comanager Rajendra Nair. Shroff has comanaged this strategy since 2003 and his contribution will be missed given his greater role in decision-making over the years, although he leaves the firm on the back of an extended period of underperformance and heavy outflows. Incoming comanager Ebrahim has 30 years of industry experience and joined the firm from Amundi in 2015. He has a mixed track record as a regional Asian equity manager, and we have yet to build conviction in him as an Indian equity manager.

We also need to time to observe the new team dynamics, where Ebrahim will focus on portfolio construction and leave stock selection to Nair. Ebrahim will also bring some changes to the strategy’s execution, such as a closer eye on sector concentration and increasing the number of portfolio holdings, although the exact changes and effectiveness are unclear at this stage. We have reduced both People and Process ratings to Average from Above Average on the back of our reduced conviction. As a result, the Morningstar Analyst Rating of this investment trust has been lowered to Neutral from Bronze.

Note: under the Morningstar methodology 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

Jeffrey Schumacher  is a Fund Analyst with Morningstar Benelux.