New Ratings
Allianz Global Equity Growth W USD D – Bronze
Ronald van Genderen, CFA
We initiate coverage on Allianz Global Equity Growth with Morningstar Analyst Ratings ranging from Neutral to Bronze depending on the fee level of the share class. The clean W USD D share class receives a Bronze rating. The strategy is in the trusted hands of Thorsten Winkelmann, an experienced and highly regarded manager, but his 12-member Global Equity Growth team needs to find solid footing after several changes in recent years. These changes include the formation of this team in May 2020 following the merger of the European Equity Growth team, led by Winkelmann, and the Global Equity team. Several members of the latter team left the firm over a 12-month time frame around the time of the merger.
Although the merger added global equity experience to Winkelmann’s team and we are comforted by the team’s expertise in European markets, we note that its experience on a global mandate, which includes the highly competitive US universe, is still relatively limited. Although this global strategy was incepted only in June 2017, it relies on a time-tested approach that has been successfully implemented at the European-focused strategies managed by Winkelmann’s team. Implementing this approach on a global scale is a natural extension of its strong European heritage, especially after the team proved that the approach was equally effective on a global ex-US basis since April 2013. The approach relies on a well-defined and structured bottom-up process, but with considerable freedom for the team members to scour the market and benchmark-agnostic portfolio construction leading to a reasonably diversified but conviction-led portfolio.
Allianz Oriental Income RT EUR – Bronze
Claire Liang, CFA
We are initiating coverage on Allianz Oriental Income with a Morningstar Analyst Rating of Bronze on its clean share class RT EUR. This strategy has been led by highly experienced portfolio manager Stuart Winchester since its inception in 1994. Winchester boasts 37 years of experience, 30 of them with Allianz. He came across as a passionate and hands-on investor, and we see his Japan investment credentials as well as his proven investment savvy in smaller-cap firms as key strengths for the strategy.
The investment process is primarily bottom-up driven and focuses on firms with great growth opportunities, competent management teams, and sound cash flow and balance sheet strengths. A key distinguishing feature here is Winchester’s preference for underfollowed small/mid-cap stocks, and the portfolio typically has more than 40% of assets invested in small/mid-caps, compared with the less than 10% for the MSCI AC Asia Pacific Index. While capacity is something worth monitoring, we believe Winchester’s extensive investment experience, coupled with a differentiated and consistently applied investment approach, makes this strategy a good offering for investors seeking Asia-Pacific equity exposure.
Rathbone Multi Asset Total Return S – Bronze
Jonathan Miller
We initiate coverage of Rathbone Multi Asset Total Return with a Morningstar Analyst Rating of Bronze for the clean share class. More expensive share classes are rated Neutral. This is a sister strategy to Bronze-rated Rathbone Multi Asset Strategic Growth and is run by the same management duo of David Coombs and Will McIntosh-Whyte. Coombs has more than two decades of multi-asset investing experience at various organisations and has run this strategy since June 2009. He is closely supported by McIntosh-Whyte, who joined Rathbones in 2007 and spent eight years managing multi-asset mandates for charities before joining Coombs in 2015. They have had a successful partnership since then. The aim is for returns above the Bank of England base rate plus 2% over a rolling three-year period.
We don't see that as too taxing a hurdle given the portfolio's makeup, and because of its historical equity exposure, the strategy is a good fit for the GBP moderately cautious allocation Morningstar Category. We find the process disciplined and well-structured, and we like the thought given to how the portfolio could be protected against a range of different risks. Under Coombs' tenure, performance has been broadly in line with the peer group with slightly lower volatility. Despite being behind the category index, which is heavy on government bonds, over this period, volatility and drawdowns have been less than those of the peer group. This reinforces our positive view on a forwardlooking basis of this somewhat differentiated approach.
UTI India Dynamic Equity RDR – Silver
Nehal Meshram
We initiate coverage of UTI India Dynamic Equity with a Morningstar Analyst Rating of Silver on the clean RDR share class. More expensive share classes are rated Bronze. This strategy has been managed by Ajay Tyagi since its inception. Tyagi has worked for the fund company for more than two decades and is an able portfolio manager. We like his distinctive long-term investment philosophy, which has resulted in the fund's outperformance during his tenure. Tyagi selects stocks based on a bottom-up approach and quality, growth, and valuation are the core drivers of his style.
The team favours equities that are cheaper than peers and utilize historical valuations when making investment decisions based on relative valuations. We like the buy-and-hold investment approach of the manager and low portfolio turnover demonstrates the manager’s patience and conviction in the outcomes of the investment process. Further, the process restructuring and portfolio tweaking have started showing a positive outcome. The fund displayed above-average returns during the manager’s tenure and is ranked as a second-quartile performer. Our conviction in the strategy remains high, underpinned by our confidence in the portfolio manager. The investment process has been consistently applied, and the strategy mandate is in sync with Tyagi’s investment style. We believe a continued focus on quality will lead to superior risk-adjusted returns in the long run.
Downgrades
Stewart Investors Indian Subcontinent Sustainability B – Silver from Gold
Samuel Lo, CFA
Stewart Investors Indian Subcontinent Sustainability’s best-in-class portfolio manager, solid investment team, and time-tested investment process continue to make it one of our favourite Indian equity offerings. Lead manager Sashi Reddy has delivered outstanding results since his involvement in this strategy in 2009, and we are consistently impressed by his investment acumen during our meetings. The strategy’s quality-focused and conviction-driven investment approach has been steadfastly applied over the years to great effect. We maintain the People rating at High and the Process rating at Above Average. Nevertheless, owing to changes in the competitive landscape within the Indian equity Morningstar Category, the Morningstar Analyst Ratings of the less expensive B share classes have been driven down to Silver from Gold. The more expensive A share classes continue to be rated Silver.
- As part of Morningstar's enhanced methodology for Analyst Ratings, different share classes have different Ratings
