Future Opportunities: Morningstar's Latest Prospects List

Twice a year, Morningstar updates its list of promising funds we may add to full coverage. Analyst Jeff Schumacher explains what's new. 

Lukas Strobl 26 January, 2023 | 8:53AM
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Lukas Strobl: Morningstar's fund analysts just released their latest prospects list. That is a set of actively managed funds that look promising and may get a Morningstar Analyst Rating in the future. For investors, that kind of list is a handy look over the horizon. With me is the report's lead author, Jeffrey Schumacher.

Jeff, what's new in our prospects list?


Jeffrey Schumacher: Yeah. So, we have added three new strategies to the prospect list over the past six months, which are Barings Global High Yield Bond Fund, L&G Future World ESG Multi series and also RobecoSAM SDG High Yield Bonds.

So, I would like to zoom in a bit on the Robeco strategy. So, this fund was launched in October 2019, and we are very impressed actually by the team that runs the strategy. So, the fund is co-managed by Sander Bus and Christiaan Lever, who are backed by an experienced team of 22 credit analysts. We know Sander Bus already since we are also covering the strategy's conventional sibling, which is Robeco High Yield Bond Fund, and that strategy actually carries a people pillar score of high. So, we think highly of Sander Bus as a portfolio manager. The SDG version of the strategy also uses the same robust investment process here, which means that the team relies primarily on bottom-up security selection for its alpha generation with top-down beta management playing a less important role here in the strategy. So, the SDG version of the strategy invests exclusively in global high yield corporate bonds of issuers with a positive or neutral impact to the Sustainable Development Goals, which also means that the portfolio is slightly more concentrated than its conventional sibling.


Strobl: Three new names to watch then. Of course, the hope for these funds is for them to graduate into full coverage and to get that coveted Morningstar Analyst Rating. We last spoke half a year ago. Have any of the prospects on that list graduated and are now in your coverage?


Schumacher: Certainly. So, we have initiated coverage on two former prospects that we think are of high quality. So, the first one that graduated is PIMCO GIS Asia High Yield Bond Fund. So, this strategy is led by a trio of seasoned portfolio managers including Stephen Chang, who has managed this strategy since its inception in February 2019. He's also quite seasoned having 26 years of investing experience. So, the three managers here are supported by a 9-member Asia Pacific credit research team, but they can also leverage on PIMCO's broader 75-member global credit analyst team. So, with all these resources we think the managers and the fund have substantial resources to manage the strategy, which earns them an above-average people pillar score.

We also like the process very much here, as it follows PIMCO's trademark investment approach, combining the firm's broader macro views with bottom-up security selection by the credit analysts. It's a robust process in our view, which earns an above average process score leading to Morningstar Analyst Ratings of Silver for the cheaper share classes here and Bronze and Neutral ratings for the more expensive ones.

The second strategy that got rated is Schroder ISF Sustainable Euro Credit Fund, which is managed by Saida Eggerstedt. So, she has substantial experience in managing sustainable credit portfolios, which is highly relevant for managing this sustainable version of what is Schroder's flagship European Corporate Bond strategy that is managed by Patrick Vogel. So, the fund's theme-driven investment process shares many similarities with the flagship Euro Credit Fund, with a few unique characteristics of its own of course that increase its sustainability profile, such as certain sector exclusions but also its exposure to green bonds, for example. So, the strategy earns Morningstar Analyst Ratings ranging from Silver to Neutral, depending on the fee levels.


Strobl: So, two new ratings and three new candidates to keep an eye on. Thank you for the update, Jeff. For Morningstar, I'm Lukas Strobl.

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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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Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Barings Global High Yield Bond B EUR Dis90.39 EUR-0.08Rating
PIMCO GIS Asia HY Bd E USD Inc6.94 USD-0.36Rating
RobecoSAM SDG High Yield Bonds IE EUR9,826.93 EUR-0.28Rating
Schroder ISF Sust Euro Crdt A Dis EUR93.11 EUR-0.23Rating

About Author

Lukas Strobl  is the editorial manager for EMEA at Morningstar.

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