Morningstar Fund Ratings: Weekly Round-up

The latest batch of Morningstar fund rating changes features two upgrades and one downgrade, with one German equity fund upgraded to Gold

Natalia Wolfstetter 8 September, 2020 | 9:23AM
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Fund Ratings

New Ratings

Stewart Investors Global Emerging Markets Sustainability – UK – Silver

Andrew Daniels

Stewart Investors Global Emerging Markets Sustainability is run by the 12-member Sustainable Funds Group within Stewart Investors, and it’s been led by Jack Nelson since May 2017. Nelson, who joined the firm in 2011 after receiving his bachelor’s degree, is less experienced than many emerging-markets equity managers. That said, he has been a comanager on the strategy since 2014 and has since been groomed under the well-regarded former lead manager David Gait, who is still a comanager here and remains actively involved. Not only does Nelson demonstrate an intimate knowledge of current and prospective holdings, but he has also done an excellent job adhering to Stewart Investors’ best-in-class investment approach.

Nelson seeks stocks led by reliable management teams that can deliver sustainable and predictable growth through pricing power, franchise strength, and limited regulatory oversight. The team homes in on firms whose revenues are less likely to be impacted during economic downturns, which has led the portfolio to be among the least volatile options in the global emerging markets equity Morningstar Category over the long term. Overall, conviction in the investment team and approach employed lead us to initiate Morningstar Analyst Ratings of Silver for the strategy’s cheapest share classes – including the B Acc GBP share class – while the more expensive share classes earn Bronze ratings.

Stewart Investors Global Emerging Markets Sustainability – Ireland – Silver

Andrew Daniels

Stewart Investors Global Emerging Markets Sustainability is run by the 12-member Sustainable Funds Group within Stewart Investors, and it’s been led by Jack Nelson since May 2017. Nelson, who joined the firm in 2011 after receiving his bachelor’s degree, is less experienced than many emerging-markets equity managers. That said, he has been a comanager on the strategy since 2014 and has since been groomed under the well-regarded former lead manager David Gait, who is still a comanager here and remains actively involved. Not only does Nelson demonstrate an intimate knowledge of current and prospective holdings, but he has also done an excellent job adhering to Stewart Investors’ best-in-class investment approach.

Nelson seeks stocks led by reliable management teams that can deliver sustainable and predictable growth through pricing power, franchise strength, and limited regulatory oversight. The team homes in on firms whose revenues are less likely to be impacted during economic downturns, which has led the portfolio to be among the least volatile options in the global emerging markets equity Morningstar Category over the long term. Overall, conviction in the investment team and approach employed lead us to initiate Morningstar Analyst Ratings of Silver for the strategy’s cheapest share classes – including the VI USD Acc clean share class – while the more expensive share classes earn Bronze ratings.

Upgrades

Fidelity Germany – Gold from Silver

Natalia Wolfstetter

Fidelity Germany benefits from an experienced manager with strong stock-picking skills and extensive analytical support. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, cheaper share classes, including the Y clean share class, are upgraded to a Morningstar Analyst Rating of Gold, while the rating for the pricier retail share classes is lowered to Bronze.

iShares Edge MSCI USA Val Fac ETF (IUVF) – Silver from Bronze

Briegel Leitao

IShares Edge MSCI USA Value Factor ETF is a solid value index strategy that adopts a sector-relative approach to weightings and targets the cheapest stocks within each sector. This approach gives the fund cleaner exposure to stocks that are truly cheap relative to their peers, while minimising active sector bets against the parent benchmark, the MSCI USA Index. The fund's strong value orientation and low ongoing charge of 0.20% build on this advantage. However, owing to its sector-relative approach, the strategy takes greater risk than most passive peers. These points collectively underpin its Morningstar Analyst Rating of Silver.

Downgrades

Lazard Patrimoine Croissance – Bronze from Silver

Samiya Jmili

Lazard Patrimoine Croissance boasts a long-tenured, seasoned manager whose investment acumen and cautious mindset have been key to the success of this strategy for three decades. Even if the lack of a clear succession plan for the lead manager -who is in his mid-sixties- is a source of concern here, we think those strengths should help the fund continue to outperform, but its high fees are a constant headwind. Under our enhanced ratings framework, which places a greater focus on fees, the fund’s Morningstar Analyst Rating is reduced.

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

Natalia Wolfstetter  ist Director Fund Analysis bei Morningstar