Morningstar Fund Ratings: Weekly Round-up

The latest batch of Morningstar fund rating changes features two new ratings and an upgrade from Bronze to Gold for a PIMCO bond fund

Samiya Jmili 20 October, 2020 | 9:10AM
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Fund Ratings

New Ratings

DWS Invest Multi Opportunities – Silver

Thomas De Fauw

DWS Invest Multi Opportunities benefits from a strong portfolio management team and flexible approach. The strategy is identical to the longer-running Deutsche Multi Opportunities that we covered since 2019. Both have a Morningstar Analyst Rating of Silver for the cheapest share classes, while pricier shares are rated Neutral. We hold the team in high regard, although recent changes to portfolio responsibilities prompt a degree of caution. Lead manager Henning Potstada has proven to be a skilful investor. However, because of his relatively weaker stock selection results since mid-2010, portfolio responsibilities have recently been shared with comanagers Christoph Schmidt, who is now in charge of the equity selection and Thomas Graby, who oversees the safe-haven bucket. The team has developed a distinct approach over time. The managers have added value through their top-down allocation and by identifying investment themes. The fund is set up with a fund-of-funds structure and has to invest a minimum of 51% into funds. Usually, in-house funds or exchange- traded funds are used to avoid double charging. 

FvS Multiple Opportunities – Gold

Natalia Wolfstetter

This fund was incepted in 2013, and it largely has the same holdings as older sibling FvS Sicav Multiple Opportunities, which has been led by FvS co-founder Bert Flossbach since its launch in 2007. The manager can invest in equities, which dominate the fund's risks, bonds, convertibles, precious metals (mainly gold), and cash. He has significant leeway to adjust the fund's allocation to equities in a wide range of 25%-100%. This flexible high-conviction approach has been implemented with strong risk awareness and has served investors well over time. FvS Multiple Opportunities II’s cheapest share class EUR MT earns a Morningstar Analyst Rating of Gold. Institutional share classes earn a Silver rating, while more expensive ones, including the retail share class R, are rated Bronze.

Upgrades

PIMCO GIS US IG Corporate Bond – Gold

Samiya Jmili

Pimco GIS US Investment Grade Credit Bond benefits from the skill of its veteran lead manager, the support of an impressive group of corporate bond managers and analysts, and a versatile process that draws on the firm's robust macroeconomic and fundamental research. This supports a High rating on People and an Above Average rating on Process, which leads to an upgrade of the fund’s cheapest shares from a Morningstar Analyst rating of Bronze to Gold, while its more expensive share classes are downgraded to Neutral. The strategy struggled in the first quarter’s sharp sell-off as its industry preferences – including an emphasis on banks, REITs, and gaming, an underweighting in defensive sectors, plus a midteens emerging-markets debt stake – hurt performance. Although it has made up some ground versus its benchmark in the subsequent recovery, it still lagged 80% of its peers through September 2020. This recent slump doesn’t dent our conviction here though as the team's value discipline, impressive corporate research and trading heft give this strategy an ongoing advantage.

Downgrades

Royal London Sustainable Managed Growth – Neutral from Bronze

Rajesh Yadav

Following the Royal London Asset Management’s announcement that, from October 1, 2020, Richard Nelson has stepped away from managing the fixed-income part of the Royal London Sustainable range, we met with incoming manager Shalin Shah, who is an experienced investor and has been with Royal London’s fixed-income team for some time. He is well-versed with the overall investment process. However, we believe that Nelson stepping away from managing the fixed-income part of the Royal London Sustainable range is a loss to the franchise. He, along with Mike Fox, was one of the key architects of the Sustainable range from its early days, and their partnership an important element to its success. This, combined with Shah’s limited experience in managing ESG-focused strategies, especially within the multi-asset context, sees our conviction on the People Pillar for the fixed-income-heavy offering within the range – namely Managed Growth – move to Average from Above Average. As a result, the Morningstar Analyst Rating has been lowered to Neutral from Bronze.

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

Samiya Jmili  Samiya Jmili is a manager research analyst at Morningstar