Morningstar Fund Ratings: The Weekly Update

In our weekly ratings update, we unveil the latest upgrades and downgrades from Morningstar analysts

Bhavik Parekh 13 April, 2022 | 8:49AM
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Ratings

Upgrades

BMO Responsible UK Equity 2 Acc – Silver From Bronze

Bhavik Parekh, CFA

BMO Responsible UK Equity is a solid option for investors looking for exposure to a diversified portfolio of UK equities with a sustainable bias. It is led by an experienced lead manager in Catherine Stanley, who has led the strategy since 2009. Stanley looks for quality based on the three tenets of quality management, strong financial position and strong business model. Further, the approach to ESG involves more than a simple negative screen, and the team will weigh up ESG risks and opportunities when assessing stocks. Owing to higher conviction in the experienced supporting team, which has been very stable and has grown to seven (including Stanley), we have upgraded the People pillar to Above Average. As a result, the 2 Acc share class is upgraded to a Morningstar Analyst Rating of Silver from Bronze. Other share classes range from Silver to Neutral, depending on fees.

Downgrades

iShares MSCI Japan SRI ETF – Bronze From Silver

Kenneth Lamont

This fund offers low-cost representative exposure to Japanese equities in a category in which passive strategies have proved difficult to beat. However strict environmental, social, and governance screens result in significant bets being taken against the parent MSCI index, limiting our confidence in the funds ability to outperform over longer periods. For these reasons, this fund has been downgraded to Morningstar Analyst Rating of Bronze from Silver.

Stewart Investors Asia Pacific Leaders Sustainability B GBP – Silver From Gold

Justin Walsh

Stewart Investors Asia Pacific Leaders Sustainability remains an excellent choice for investors however our conviction is slightly tempered due to the strategy’s notable bias towards small and mid-cap names, a large degree of crossover in holdings across the firm, and significant holdings in India. For this reason, capacity is a watchpoint. Hence, we have downgraded the Process rating to Above Average from High, resulting in a downgrade of the strategy’s cheapest share classes to a Morningstar Analyst Rating of Silver, including the clean B GBP share class, while its more expensive share classes earn Bronze ratings. Notwithstanding this, the strategy continues to be led by an excellent team. David Gait has led this strategy since July 2016, and he is joined by comanager Sashi Reddy. Gait is an experienced investor with more than 20 years at the firm and has led the all-cap-focused Stewart Investors Asia Pacific Sustainability strategy, an all-cap strategy, since 2005, so he knows this territory well.

Stewart Investors Asia Pacific Sustainability B GBP – Silver From Gold

Justin Walsh

Stewart Investors Asia Pacific Sustainability remains an excellent choice for investors however our conviction is slightly tempered due to the strategy’s notable bias towards small and mid-cap names, a large degree of crossover in holdings across the firm, and significant holdings in India. For this reason, capacity is a watchpoint. Hence, we have downgraded the Process rating to Above Average from High, resulting in a downgrade of the strategy’s cheapest share classes to a Morningstar Analyst Rating of Silver, including the clean B GBP share class, while its more expensive share classes earn Bronze ratings. Notwithstanding this, the strategy continues to be led by an excellent team. David Gait has led this strategy since its December 2005 inception. Gait is an experienced investor with more than 20 years of firm tenure and has also successfully led the larger-cap-focused Stewart Investors Asia Pacific Leaders Sustainability strategy since July 2016. He is joined by comanager Sashi Reddy.

UBS (Lux) Fund Solutions MSCI EMU Socially Responsible UCITS ETF – Bronze From Silver

Kenneth Lamont

This environmental, social, and governance-screened fund retains the core benefits of a broad market-cap strategy, which have proved difficult to beat over longer periods in the eurozone large-cap equity Morningstar Category. That said, the strict environmental, social, and governance screens result in significant bets being taken against the parent MSCI index, reducing our confidence in the funds ability to outperform over longer periods. Cheaper directly comparable sustainable and non-sustainable options are also available. For these reasons, the fund has been downgraded to a Morningstar Analyst Rating of Bronze from Silver.

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

Bhavik Parekh  is an analyst for Morningstar UK