New Ratings
BNP Paribas Global Environment – Silver
Ronald Van Genderen
BNP Paribas Global Environment is subadvised by Impax and comanaged by a cohesive and experienced portfolio construction team, one of the strongest within its Morningstar Category. This four-member team is part of and backed by Impax's listed equity team, an extensive group that mixes experienced professionals with more-junior staff. The team applies an established and well-structured bottom-up process that targets growth companies where at least 20% of business is derived from activities in environmental markets. The team follows a detailed 10-step research process and carries out a comprehensive valuation assessment based on discounted cash flow models and various multiples, including scenario analysis. We initiate coverage with a Morningstar Analyst Rating of Silver on its very cheapest share classes, while more expensive ones earn Bronze or Neutral ratings.
Impax Environmental Leaders – Silver
Ronald Van Genderen
Impax Environmental Leaders is comanaged by a cohesive and experienced portfolio construction team, one of the strongest within its Morningstar Category. This four-member team is part of and backed by Impax's listed equity team, an extensive group that mixes experienced professionals with more-junior staff. The team applies an established and well-structured bottom-up process that targets growth companies where at least 20% of business is derived from activities in environmental markets. The team follows a detailed 10-step research process and carries out a comprehensive valuation assessment based on discounted cash flow models and various multiples, including scenario analysis. We initiate coverage with a Morningstar Analyst Rating of Silver on all its share classes.
Trojan Fund (Ireland) – Gold
Rajesh Yadav
We have initiated coverage on the Troy Trojan (Ireland) fund with a Morningstar Analyst Rating of Gold for its clean O share class. The fund is an offshore version of a long-standing Troy Trojan fund, run by Sebastian Lyon, who has over three decades of experience in multi-asset investing. Both funds have almost 100% overlap with each other and are managed using same philosophy - seeking capital preservation and long-term capital growth. We initiate coverage here with High opinion on both People and Process, which are similar to the longer running OEIC fund.
Upgrades
BGF World Bond – Silver from Bronze
Evangelia Gkeka
BGF World Bond benefits from an experienced management team, backed by the quality and depth of additional resources at BlackRock. The Morningstar Analyst Rating for the strategy’s clean share class (D2 USD) is upgraded to Silver from Bronze. More expensive share classes are rated Bronze and Neutral. The strategy is managed by Rick Rieder, CIO of global fixed income and Aidan Doyle, who was appointed coportfolio manager in October 2017. In early 2020 another two experienced portfolio managers were added to the lineup. Russell Brownback, head of global macro positioning for fixed income and Trevor Slaven, who focuses on top-down thematic idea generation and regime identification. They are further supported by sector specialist teams that bring individual trade ideas for the implementation in the global portfolios and wider BlackRock resources. Overall, our high conviction in this strategy's resources is reflected in an upgrade of the People Pillar rating to High. The managers employ a duration controlled, relative value approach investing primarily in government, investment grade corporate and securitised bonds. The team’s effective and disciplined implementation of the process underpins the Above Average Process rating.
ASI Japanese Equity – Silver from Bronze
Samuel Lo
The Aberdeen Standard Japanese Equity strategy is managed by a solid investment team led by the capable Kwok Chern-Yeh and employs a time-tested quality-focused investment approach. We reiterate our conviction in the strategy and maintain both the People and Process ratings at Above Average. Meanwhile, due to the evolving landscape of competing products, the Morningstar Analyst Ratings for the cheapest share classes, including the clean I Acc share class, have been lifted to Silver from Bronze. The other share classes continue to be rated Bronze.
AS SICAV I Japanese Equity – Silver from Bronze
Samuel Lo
The Aberdeen Standard Japanese Equity strategy is managed by a solid investment team led by the capable Kwok Chern-Yeh and employs a time-tested quality-focused investment approach. We reiterate our conviction in the strategy and maintain both the People and Process ratings at Above Average. Meanwhile, due to the evolving landscape of competing products, the Morningstar Analyst Ratings for the cheapest share classes, including the clean X Acc JPY share class, have been lifted to Silver from Bronze. The other share classes continue to be rated Bronze or Neutral, depending on their fee levels.
Downgrades
Veritas Global Equity Income – Bronze from Silver
Jeffrey Schumacher
As announced in November 2018, Charles Richardson, the longstanding lead manager of Veritas Global Equity Income, has stepped down from day-to-day portfolio management per 1 January 2020. Ian Clark, who joined Veritas as a roving analyst in September 2018, joined Richardson as comanager in 2019 and took the reins in the final quarter of that year. Clark gained vast experience as an equity income analyst when working at Newton, where he also briefly comanaged their global equity income fund. His familiarity with the investment style is a pro, but he does not yet have solid credentials as portfolio manager. With seasoned portfolio manager Andrew Headley acting as a comanager and the support of a solid eight-strong analyst team, we retain the People Pillar score of Above Average. While Clark adheres to the firm’s hallmark philosophy and investment process, the portfolio is still in transition as Clark is gradually reshaping the portfolio to make it fit with his preferences.
This restructuring is taking longer than we expected and while we salute Clark’s careful approach, it also underlines how research intensive and demanding the stock selection is. He’s also uncomfortable with the portfolio’s current characteristics, in particular the larger stake in real estate and Asia. Given that just a fifth of Veritas’ 270-stock universe is eligible for this fund, the team is actively looking for new ideas. We therefore lower the Process Pillar score to Above Average from High. Veritas Global Equity Income retains a Silver Morningstar Analyst Rating on its cheaper share classes, while more expensive ones are downgraded to Bronze.
Nordea 1 - European High Yield Bond Fund – Neutral from Bronze
Thomas De Fauw
Although we retain a People Pillar score of Above Average and a Process Pillar score of Average, our enhanced ratings methodology and increased competition from lower-priced rivals in the EUR High Yield Bond Morningstar category mean that the fund’s Morningstar Analyst Ratings drop from Bronze to Neutral for all its share classes. The team behind Nordea 1 – European High Yield is well-resourced and Sandro Näf and Torben Skødeberg have successfully steered this fund since its 2002 inception. They began their tenure at the fund in Nordea, and in 2007 they founded Capital Four, a boutique dedicated to European leveraged finance.
In 2016 Northill, a private investment company, acquired the majority of Capital Four on terms which we believe will help ensure team stability. The managers’ and investors’ interest are aligned through the fact that the partners invested half the deal proceeds in the funds they manage. The fund’s process is well-constructed but concerns on capacity and liquidity management brought on by the strategy’s large size curb our conviction.
Note: Under Morningstar's ratings methodology, different share classes of a fund may have a different rating
