5 New Ratings for Investment Trusts

Morningstar has just released in-depth research and ratings for five popular investment trusts

Alanna Petroff 12 September, 2012 | 8:00AM
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Morningstar’s London-based investment trust research team has just released rating this week for five popular investment trusts. The ratings range from Gold to Neutral.

Below is a list of the investment trusts that are now carrying fresh new ratings.

Click on the investment trust name to see Morningstar’s latest research, and click on the ticker symbol to see a summary of information about each trust, including information on the trust’s net asset value, discount/premium and past performance.

Finsbury Growth & Income (FGT)

Rating: Gold

This investment trust is considered to be a “standout” investment option by Morningstar analyst, Szymon Idzikowski. The fund’s manager, Nick Train, is “an experienced, talented, and pragmatic manager ... [and] Train’s process is thorough and well-proven over a number of market cycles,” explains Idzikowski.

Throgmorton Trust (THRG)

Rating: Silver

This investment trust earned a Silver rating because Morningstar analysts “have high conviction in the [trust’s] management duo. Mike Prentis and Richard Plackett are specialists who have spent most of their career investing in UK small-cap stocks,” explains Jackie Beard in her research report. However, Beard says she is somewhat concerned about the fund’s fees, but still expects the managers will ensure the fund outperforms in the long run.

Templeton Emerging Markets Investment Trust (TEM)

Rating: Bronze

“Our confidence [in this trust] is due in part to the management team at the fund’s helm,” explains Morningstar’s latest research. “Dr. Mark Mobius has been at the firm since 1987 and he has built a strong and loyal team there. It’s a team that comprises more than 30 and is spread globally to enable on-the-ground research. Mobius is assisted in the day-to-day running of the fund by Allan Lam, Dennis Lim, and Tom Wu and in reality those three are making the investment decisions, although Mobius has oversight of these ... Our main concern centres around key [management] risk: We’re comfortable that it’s not just Mobius running the show, but should he eventually step down it will likely impact every fund at which he’s named manager, and there are a lot of them, despite the breadth of resources and skills in the team.” This key risk led Morningstar to give the fund a Bronze rating.

Pacific Assets Trust (PAC)

Rating: Bronze

Morningstar analysts believe the recent management change at this trust is a positive sign, with David Gait taking charge in July 2010. Analysts also praise the trust’s bottom-up stock selection process, which helps the trust focus on investments that could be considered “ethical”. Of course, Beard is quick to point out that “this isn’t an ethical fund ... The team looks for good-quality businesses that can survive in the long term and which aren’t having a detrimental impact on the world. The team’s holdings fall into three themes: those with a positive impact on society, those financial companies acting responsibly, and those involved in infrastructure projects that are necessary to support long-term sustainable development.”

F&C Capital & Income (FCI)

Rating: Neutral

While Morningstar analysts respect the investment trust manager, Julian Cane, concerns remain over F&C, which has undergone considerable changes since 2004. Analysts are particularly concerned that Cane is working with a small team that has a heavy workload. Furthermore, the research report states: “there’s little that sets [this trust] apart from peers and gives it a competitive edge.” 

Morningstar’s fund ratings range from Gold to Negative. The ratings indicate whether Morningstar analysts are optimistic about a fund’s future performance. A Gold rating indicates Morningstar analysts think highly of a fund and expect it to outperform its peers and relevant index over a full market cycle of at least five years. Silver and Bronze ratings also indicate positive sentiment from Morningstar analysts. A Neutral rating indicates that Morningstar analysts believe a fund isn’t likely to deliver standout returns but also isn’t likely to significantly underperform. A Negative rating indicates Morningstar analysts believe the fund is inferior compared to its peers and has at least one flaw that is likely to significantly hamper future performance.

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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Alanna Petroff

Alanna Petroff  is a financial journalist with Morningstar UK.