Morningstar fund reviews and re-ratings – April 2017

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 one-to-five stars based on a fund’s past risk- and load-adjusted returns versus category peers.

Morningstar’s sustainability rating, which was launched in March last year, helps investors evaluate how well the companies in a fund’s portfolio are managing environmental, social and corporate governance (ESG) risks and opportunities. 

Analyst ratings for April 

Source: Morningstar; *All scored funds within a category are ranked by their Sustainability scores and grouped into five categories. The top 10% of scored funds are described as “high”, the next 22.5% as “above average”, the next 35% as “average”, the next 22.5% as “below average”, and the bottom 10% as “low”. 

1. MFS Meridian Global Concentrated W1 USD (available for sale in Hong Kong)

Coverage initiated with a Silver rating. The fund has a sturdy foundation for continued success even as star co-manager David Mannheim’s retirement looms. Fellow manager Roger Morley has shown his credentials since rising to this role in mid-2009, applying a disciplined stock-selection process that is both rigorous and repeatable. Ryan McAllister has been a full time co-manager on this strategy since March 2017. Mannheim is expected to retire towards the end of 2017. McAllister’s portfolio management experience is mostly limited to the energy sector. This engenders some uncertainty. Still, MFS deserves credit for its early, considered, and transparent approach to succession. Morley’s successful shift from seasoned MFS equity analyst to co-manager is a template the shop hopes McAllister will replicate. Importantly, a well-resourced analyst team provides a foundation for sound decisions. Staff takes great care to identify the most robust companies within its investable universe, whittling this down to 20-30 stocks. It remains to be seen how well McAllister settles into the co-manager role, but this fund remains superior in many respects. We initiate coverage with a Silver rating, which is in keeping with the fund’s Silver-rated sibling, the Australia-domiciled MFS Global Concentrated Equity Trust.

− Natalia Wolfstetter, director of fund analysis

2. MFS Meridian Global Equity W1 USD (available for sale in Hong Kong)

Coverage initiated with a Silver rating. The fund has a structure that can succeed even as its star co-manager David Mannheim’s exit nears. Fellow manager Roger Morley has shown his credentials since rising to this role in mid-2009, applying a disciplined stock-selection process that is both rigorous and repeatable. Ryan McAllister has been a full time co-manager on this strategy since March 2017. Mannheim is expected to retire towards the end of 2017. McAllister’s portfolio management experience is mostly limited to the energy sector. This engenders some uncertainty. Still, MFS deserves credit for its early, considered, and transparent approach to succession. Morley’s successful shift from seasoned MFS equity analyst to co-manager is a template the shop hopes McAllister will replicate. Importantly, a well-resourced analyst team provides a foundation for sound decisions. Staff takes great care to identify the most robust companies within its investable universe, resulting in a diverse, 80- to 100-stock portfolio that looks little like the benchmark. It remains to be seen how well McAllister settles into the co-manager role, but this fund remains close to the top choices in the field. We initiate coverage with a Silver rating, which is in keeping with the fund’s Silver-rated siblings, Australia- and US-domiciled MFS Global Equity Trust and MFS Global Equity.

− Natalia Wolfstetter, director of fund analysis

3. Mirae Asset Asia Sector Leader Eq A USD (available for sale in Hong Kong)

Coverage initiated with a Neutral rating. We feel this strategy shows promising signs but doesn’t yet have the credentials of our preferred strategies in this space. Portfolio manager Rahul Chadha has led the team since 2010 and has built both the team and process. We feel he’s a solid investor who is backed by an investment team that has a broad mix of experience. The investment philosophy is centred on the belief that the Asian consumer story is the best way to play the long-term secular growth in the region. The portfolio is conviction based and will have significant country/sector biases relative to peers and the index. An attractive fee is also a positive here. We’d expect our conviction to grow over time if the strategy shows its ability to deliver over multiple market conditions.

− Mark Laidlaw, senior analyst for manager research

4. Franklin Mutual Beacon A Acc USD (available for sale in Hong Kong and Singapore)

Downgraded to Neutral from Bronze.

− Francesco Paganelli, fund analyst

5. Allianz Euroland Equity Growth AT EUR (available for sale in Hong Kong)

Fund under review from Silver. We have placed the fund’s analyst rating to under review following a manager change announcement. Fund manager Matthias Born will leave Allianz Global Investors by the end of September 2017. We will be meeting with the new managers in due course to discuss the changes to the teams and their impact on the strategies, and we will update the fund’s analyst rating at that time.

− Barbara Claus, fund analyst

6. Allianz Europe Equity Growth AT EUR (available for sale in Hong Kong and Singapore)

Fund under review from Silver. We have placed the fund’s analyst rating to under review following a manager change announcement. Fund manager Matthias Born will leave Allianz Global Investors by the end of September 2017. We will be meeting with the new managers in due course to discuss the changes to the teams and their impact on the strategies, and we will update the fund’s analyst rating at that time.

− Barbara Claus, fund analyst

7. Allianz Europe Equity Growth Sel A € (available for sale in Hong Kong and Singapore)

Fund under review from Bronze. We have placed the fund’s analyst rating to under review following a manager change announcement. Fund manager Matthias Born will leave Allianz Global Investors by the end of September 2017. We will be meeting with the new managers in due course to discuss the changes to the teams and their impact on the strategies, and we will update the fund’s analyst rating at that time.

− Barbara Claus, fund analyst

8. GS India Equity Portfolio Base Acc (available for sale in Singapore)

Fund under review from Silver. We have put the rating of the fund under review following the firm’s announcement that CIO Emerging Markets Equity and lead portfolio manager Prasant Khemka is to leave the firm, effective immediately. Khemka was an impressive manager in a highly competitive Indian equity universe, as reflected by the previous analyst rating of Silver, so his departure is most certainly a loss. Hiren Dasani, who was previously head of the Mumbai-based Indian equity team will take over as lead manager for the strategy. We will update the analyst rating once we have met with Dasani.

− Mark Laidlaw, senior analyst for manager research