The research firm’s “analyst rating” is forward-looking. On an annual basis, analysts review and if necessary re-rate the funds on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating.
The analyst rating differs from the firm’s backward-looking “star rating”, which assigns 1-to-5 stars based on a fund’s past risk- and load-adjusted returns versus category peers.
Morningstar’s sustainability rating, which was launched in March, helps investors evaluate how well the companies in a fund’s portfolio are managing environmental, social and governance (ESG) risks and opportunities.
Analyst ratings for February
1. Eastspring Inv Pan European A (available in Singapore only)
Coverage initiated with a Bronze rating. John William Olsen took over this fund in July 2014, having joined M&G the same year from Danske Capital. M&G is the sub-adviser to the fund. He built strong track records at Danske on global and European strategies. Olsen employs the same process here, and we believe it is sensible and repeatable. It focuses on finding companies with sustainable long-term competitive advantages, and then waiting for an opportunity to buy a position at an attractive price. We believe the manager applies the process well and with consistency: the quality emphasis, coupled with the discipline on valuations, is clearly reflected in the portfolio’s characteristics.
–Samuel Meakin, investment research analyst
2. Legg Mason RY US Sm Cp Opp A USD Inc A (available in Hong Kong and Singapore)
Downgraded from Silver to Bronze. The managers’ focus on unloved micro-cap firms in turmoil and willingness to invest in companies with leverage makes this fund one of the most volatile offerings among small-cap and micro-cap peers. While we believe that the fund’s bets will likely continue to pay off in the long-term, its high-risk profile leads to steep losses during market downturns, which hampers risk-adjusted returns. In addition, the fund’s fees are higher than the median, reducing the potential for outperformance. There is still a strong team and disciplined valuation focus, thus we believe a Bronze rating is appropriate.
–Lena Tsymbaluk, investment research analyst
