Morningstar Fund Ratings: The Weekly Update

We're back with more upgrades, including one strategy re-rated after a period of review

Dimitar Boyadzhiev 15 June, 2022 | 11:33AM
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New Ratings  

HSBC GIF Asia Pacific ex Japan Equity High Dividend BC – Neutral

HSBC Asia Pacific ex Japan Equity High Dividend has been led by experienced portfolio manager Sanjiv Duggal for almost a decade, but his mediocre track records on managing Asia Pacific ex Japan equity mandates beyond the dividend strategy have limited our conviction in the team’s investment capability. The investment objective is to deliver an above-market dividend yield alongside capital gains. This is achieved by splitting the portfolio equally among growth, cyclical, and defensive stocks. While the approach is reasonable for the objective, it doesn’t offer a competitive edge, and the large exposure in growth and cyclical stocks makes the strategy behave differently from a typical income-focused fund. We initiate coverage on the strategy with both People and Process Pillar ratings at Average. The strategy earns a Morningstar Analyst Rating of Neutral for its cheaper share classes, including the clean share class BC, while its pricier share class EC is rated Negative.

Chloe Qu

Magallanese European Equity P FI – Bronze

Magallanese V.I. UCITS European Equity P EUR – Bronze

We have initiated coverage on Magallanes European Equity with both People and Process Pillar ratings of Above Average. Its Spain-domiciled vehicle earns a Morningstar Analyst Rating of Bronze across most share classes, including the clean P share class, while the cheapest shares earn a Silver rating. All share classes of the Luxembourg-domiciled vehicle earn a Bronze rating. The firm's founder and CIO Iván Martín runs the strategy. Three roving analysts and one trader closely support the manager in running the firm’s three strategies, where they apply the same value-centric investment philosophy. While this small group has limited bandwidth and a lot of ground to cover, especially given the time-intensive research process applied, we think the team has shown an ability to execute the distinctive, contrarian investment process with discipline and diligence. 

Francesco Paganelli, CFA

Vontobel Clean Technology N – Bronze

This strategy has been built and managed by a long-tenured and experienced manager, indeed Pascal Dudle’s two decades of relevant experience make him one of the most seasoned investors in the sector equity ecology Morningstar Category. He benefits from a compact but quality supporting cast forming an attuned team. The team applies an established approach pursuing a holistic, structured, and repeatable investment process that is based on a well-defined impact pillar framework and in-depth company research with a longer-term mindset. The strategy has a strong track record since inception in December 2008, outperforming the most-relevant performance yardsticks on a risk-adjusted basis, like the category average and the FTSE ET100. We initiate coverage on this strategy with Morningstar Analyst Ratings ranging from Neutral to Bronze depending on fees, with the clean N share classes earning Bronze ratings. 

Ronald Van Genderen, CFA


iShares Euro Aggregate Bond ESG ETF – Silver From Bronze

This ETF changed its index from the mainstream version of the Bloomberg Euro Aggregate to one incorporating ESG screens as of late April 2022. The change of index doesn´t alter our view that this remains a solid proposition for investors seeking a one-stop shop investment-grade fixed income solution for a EUR-denominated portfolio. The ESG screening only affects the non-sovereign sleeve of the portfolio, primarily the corporate bond bucket which represents around 20% of the index and only has a marginal effect on the risk/return profile of the fund relative to its previous non-ESG incarnation. This and, more importantly, its now much lower fee, support an upgrade of its Morningstar Analyst Rating from Bronze to Silver. 

Jose Garcia-Zarate

Re-Rated From Under Review

Morgan Stanley INVF European High Yield Bond Z – Neutral

The Morgan Stanley INVF European High Yield Bond strategy has undergone several team and process changes over the last year. When Morgan Stanley acquired Eaton Vance (effective 1 March 2021), the fixed-income capabilities of the two asset managers were merged. Jeffrey Mueller along with Clifton Bowie Hunt, previously from Eaton Vance, were named the new lead portfolio manager and comanager of this fund in March 2022. The managers now rely on a combined team of European high-yield analysts from Morgan Stanley and Eaton Vance. The team have also revamped the investment process (introducing a new internal rating system and risk management system) and repositioned the fund. 

Owing to the sheer number of changes that this fund has experienced over the past year, we require time to monitor this manager pair, the new team and the efficacy of the process introduced here, prompting a reinstatement of a Morningstar Analyst Rating of Neutral across most share classes, including the clean Z shares, while more expensive share classes are rated Negative. The strategy was previously placed Under Review.

Jeana Marie Doubell

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

Dimitar Boyadzhiev  is a Passive Strategies Research Analyst for Morningstar