Morningstar Manager Check-Up

VIDEO: Morningstar analyst Rajesh Yadav looks at multi-asset funds with a sustainable remit following the introduction of the Morningstar ESG Commitment Level tool

Holly Black 17 December, 2020 | 10:48AM
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Holly Black: Welcome to Morningstar. I'm Holly Black. With me is Rajesh Yadav. He is on the Manager Research team at Morningstar. Hello.

Rajesh Yadav: Hi, Holly.

Black: So, you have recently started considering ESG factors when you're applying your fund ratings, and you've been looking at multi-asset funds, in particular. So, what have you been finding?

Yadav: Yes, Holly, right, we have recently expanded our coverage in the ESG space and very recently last month we also formally announced – at Morningstar announced that we will be taking a deeper look into funds and asset managers, how they incorporate various ESG factors into their overall investment framework. And multi-asset is an interesting piece because that has been one of the laggards on more questionable aspects of integration when it comes to ESG. And in that spirit we have looked into various options available in the market for investors and we narrowed down to few options we have already covered and under coverage, but we expanded and chosen the Liontrust Sustainable Futures strategies, which are multi-asset strategies, which we have initiated coverage. We initiated four funds, four strategies in that coverage and all of them are mixed asset or multi-asset remit meaning that they will invest in equities and bonds and can hold cash for investment purposes.

Black: So, you've been looking at four funds within that sustainable range. They've all achieved a Bronze Morningstar Analyst Rating. Let's look at a couple of them in detail. Where would you like to start?

Yadav: I think they probably have taken two ranges. One is more of a defensive range which is a sustainable defensive managed product which falls under, IA mixed asset 20% to 60% share category, meaning that it will invest somewhere between 20% to 50% of its assets within equities, but can also hold up to 20% of its assets in cash, and I think this is a proposition which we think is for conservative investors it's a good proposition to have in the in the ESG space, which is very rare to find.

Black: Okay. So, that's a cautious option. Let's move up the risk scale and look at something else in the range.

Yadav: So, the second option, which is higher risk orientation is sustainable managed strategy which falls under, IA mixed asset category of 40% to 85% share category, which can hold up to 75% of its assets in equities.

Black: Okay. So, obviously, you've Bronze rating to all four of those funds, even though they've got different risk profiles. So, how is ESG kind of affecting how we're looking at these funds?

Yadav: I think for these particular funds in this particular range, I think the one thing that is important to say that these are all fund managed by one experienced and long-tenured team that is headed by a very seasoned investor, Peter Michaelis, who has been involved in investing in the ESG space since 2001. And I think more important factor which I want to highlight here is that this team – the core of the team has been working together for all over a decade, which is very refreshing to see where you've seen the market where it is today is that every big house is coming up with their new ESG strategies. We feel there is a rush to the space of big managers coming up with these strategies and quite often we find them either they are rushed as I said or half-baked and doesn't have a depth and the long pedigree that this team has. So, that is one thing we really like about these strategies.

Black: Rajesh, thank you so much for your time. For Morningstar, I'm Holly Black.

Find out More about the ESG Commitment Level

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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.

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Holly Black  is Senior Editor,


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