Morningstar Fund Ratings: The Weekly Update

We're back with another roster of upgrades and downgrades, including an upgrade for JPMorgan Japan funds and a downgrade for Abdrn Latin American funds

Hunter Beaudoin 10 May, 2022 | 12:54PM
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New Ratings  

iShares $ High Yield Corporate Bond ESG ETF – Neutral

Jose Garcia-Zarate

Passive funds are useful instruments for investors to quickly lock in positions in the high-yield bond market, and ESG-minded investors looking for a low-cost fund may find that this fund serves that purpose. However, this remains an asset class where experienced active managers can add value over a standard index-tracking strategy.

This is particularly so in the case of this ESG strategy which excludes a sizeable portion of the investable universe and has a strong underweight in energy relative to its non[1]ESG parent. The fund’s key plus is its low fee, but this alone may not guarantee returns above the category average. The fund is awarded a Morningstar Analyst Rating of Neutral and we will continue assessing its performance.


JPM Global Income Conservative C – Silver from Neutral

Hunter Beaudoin

JPM Global Income Conservative is backed by an experienced portfolio management team that leverages an ever-evolving number of underlying sleeves to invest across asset classes and markets. Michael Schoenhaut, supported by Eric Bernbaum, is a tenured and collaborative manager who has remained at this strategy’s helm since its inception. Along with the multi-asset solutions manager research team, he takes a first-hand role in vetting and approving the addition of portfolio managers to the strategy’s underlying asset class sleeves.

Stabilised sleeve manager turnover and continued conviction in Schoenhaut and Bernbaum underpin an upgrade of the People rating to Above Average from Average. The strategy’s comprehensive and well-structured tactical asset-allocation process remains intact and continues to support a Process rating of Above Average. This results in an upgrade of the strategy’s clean C share classes and institutional share classes to Silver from Neutral and Bronze, respectively. All other share classes retain a Morningstar Analyst Rating of Neutral.

JPM Japan C – Gold from Silver

JPMorgan Japan – Silver from Bronze

Samuel Lo, CFA

Our increased conviction in JPM Japan’s lead manager Nicholas Weindling has driven an upgrade in the People rating to High from Above Average. Weindling has proved himself to be one of the most impressive Japanese equity portfolio managers within our coverage, and he has delivered a stellar long-term track record since he took over this strategy in 2007. Besides, the 25-member Japanese equity team that supports this strategy is one of the most well-resourced Japan-dedicated investment teams under our coverage.

We also remain confident in the investment process, which continues to earn a Process rating of Above Average. This is underpinned by the strength of the underlying EMAP (Emerging Market and Asia Pacific) investment process, which has been thoroughly and consistently applied by the team over the years. As such, the Morningstar Analyst Rating of the Luxembourg-domiciled vehicle's clean C share classes was upgraded to Gold F. The more expensive share classes were upgraded to Silver from Bronze, while other share classes continue to earn a Silver rating. The Morningstar Analyst Rating of the Hong Kong unit trust has been upgraded to Silver from Bronze.


Abrdn Latin American Equity X Acc USD – Neutral from Bronze

Abrdn Latin American Equity I Acc – Neutral from Bronze

Lena Tsymbaluk

Abrdn Latin American Equity continues to benefit from the depth of analytical resource and a collegiate approach. However, recently, the team has at times drifted from the core principles of the long-term quality process. Typically, the approach is expected to do well in down markets given its focus on high quality, and resilience had been a feature for some time. But the strategy struggled to protect more recently in down markets of 2018, 2020 and 2021.

The portfolio’s quality characteristics have deteriorated, which leaves some question marks over execution of the process. Therefore, the Morningstar Analyst Rating has been downgraded to Neutral from Bronze for the I and clean X share classes of the Luxembourg vehicle, while other share classes retain their Neutral ratings. The Morningstar Analyst Rating has been downgraded to Neutral from Bronze across all share classes of the UK-domiciled vehicle.

Threadneedle (Lux) UK Equities ZG – Neutral from Bronze

Teodor Dilov

Threadneedle UK continues to benefit from its seasoned manager, supported by a talented deputy and strong analytical resources, along with a consistently applied investment approach. We reiterate our conviction in the team’s capabilities and the People pillar remains at Above Average. However, our overall conviction in the manager’s process has weakened on the back of changes in the portfolio construction and failure to benefit from more recent style tailwinds. The Process pillar is downgraded from Above Average to Average, leading to a downgrade for the ZG clean share class to Neutral from Bronze. Ratings for other share classes range from Bronze to Neutral, depending on fees.



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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Hunter Beaudoin  is a fund analyst for Morningstar

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