Morningstar Fund Ratings: Weekly Round-up

A technology fund gets an upgrade in the latest batch of Morningstar fund rating reviews

Mathieu Caquineau, CFA 18 August, 2020 | 10:33AM
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Fund Ratings


T. Rowe Price Global Technology - Bronze from Netural

Mathieu Caquineau 

Alan Tu took over T. Rowe Price Global Technology in April 2019, when his predecessor left to manage T. Rowe Price New Horizons. Tu is a logical successor. He has worked closely with Spencer on this strategy as a tech analyst covering enterprise software, joining T. Rowe as an analyst in 2014. A few changes occurred in the underlying technology analyst team in 2019 that warrant some caution. However, the strategy’s flexibility is a selling point and has appeal in a sector where active management can shine. The strategy’s Process Pillar rating was therefore upgraded to Above Average from Average. While the strategy is digesting its recent personnel changes, its many advantages should pay off over time. The strategy’s Morningstar Analyst Rating is upgraded to Bronze from Neutral on all share classes.


Eastspring Inv Japan Dynamic - Bronze from Silver

Samuel Lo 

While we continue to recognise Eastspring Inv Japan Dynamic lead manager Dean Cashman’s experience and investment skill, our confidence in him has weakened given his passive attitude towards addressing the strategy’s dismal performance in recent years. We no longer believe he has a discernible edge against our other preferred Japanese equity managers. Besides, we have concerns about the investment approach’s risk management and sell discipline. The team’s use of correlation as a portfolio construction tool has not been effective in providing the intended diversification benefits, and we are wary of the team’s sell discipline and its ability to avoid value traps given the presence of some long-term laggards in the portfolio. As such, we have downgraded the People rating to Above Average from High and the Process rating to Average from Above Average. The Morningstar Analyst Rating has been lowered to Bronze from Silver for the cheaper share classes, including the clean R share class, and to Neutral for the more expensive share classes.

Pinebridge Global Dynamic Asset Allocation - Bronze from Silver

Matias Mottola

We continue to have positive view on the team and investment process of PineBridge’s Global Dynamic Asset Allocation strategy, but our conviction is slightly diminished. The 21-strong multi-asset team, led by experienced by Michael Kelly, has a broad set of expertise and works well together to implement their clearly defined process, which starts from establishing a comprehensive forward-looking world view and then identifying a selective set of trades to express the team’s investment views. Downside protection has emerged as a challenge, especially in 2018 and 2020, and the fund has struggled to keep up with its category peers. Under our enhanced rating methodology, which puts heavier emphasis on risk-adjusted returns and fees, the fund’s less expensive share classes are downgraded to Bronze from Silver, while its pricier share classes are rated Neutral.

T. Rowe Price US Blue Chip Equity - Silver from Gold

Mathieu Caquineau

The eventual retirement of experienced lead manager Larry Puglia triggers a downgrade of T. Rowe Price US Blue Chip Equity’s Morningstar Analyst Rating to Silver from Gold on all share classes except the retail A shares, which land at Bronze. Puglia has successfully led the strategy since its 1993 inception and is likely to retire within the next two years. T. Rowe Price solidified succession plans by naming Paul Greene as associate manager in January 2020, allowing him a long time to delve beyond his areas of expertise. He brings valuable skills to the job, having run T. Rowe Price Communications & Technology successfully for seven years. Plus, he'll rely on the same central analyst team from which Puglia draws, which is historically strong in growth-leaning sectors. Therefore, we remain confident about the strategy’s long-term potential.

Note: Under Morningstar's ratings methodology, different share classes of a fund may have a different rating

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

Mathieu Caquineau, CFA

Mathieu Caquineau, CFA  Senior Fund Analyst, Morningstar France

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