Morningstar has released January fund ratings for products available for sale in Asia using its new ratings framework, which places a greater focus on fees and benchmark-relative performance than previously.
The 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.
Coverage initiated
Fund: First State China A Shares
Status: Coverage initiated
Rating: Silver
We initiated coverage of First State China A Shares with an analyst rating of Silver for its clean share class III. The rating for its more-expensive retail I share class is Bronze. The strategy is run by experienced China A-shares manager Quanqiang Xian, who is supported by one of our favourite teams in the region. It differentiates itself with a strong investment culture that promotes an alignment of interest with investors and a focus on long-term returns. The strategy’s robust and disciplined investment process focused on quality stocks further adds to its appeal.
Chloe Qu
Fund: Capital Group Global High-Income Opportunities
Status: Coverage initiated
Rating: Silver
We have initiated coverage of Capital Group Global High-Income Opportunities with an analyst rating of Silver for the strategy’s cheaper share classes, while its more expensive share classes are rated Bronze and Neutral. The strategy is managed by seasoned duo Robert Neithart and David Daigle, backed by a growing and sizable bench. It offers diversified exposure to emerging markets and high-yield debt, leveraging a time-tested approach that plays to Capital Group’s strengths.
Patrick Ge
Fund: Schroder China Equity Alpha
Status: Coverage initiated
Rating: Silver
We initiated coverage of Schroder China Equity Alpha with an analyst rating of Silver across all its share classes. Lead portfolio manager Jack Lee is a veteran investor who has run the strategy since its 2013 inception. He is supported by Schroders Greater China team, which has one of the largest China A-share research capabilities in the region. We also like the team’s well-structured quality- growth-focused investment process, which has been proven over multiple market cycles across Schroders’ Asian offerings. Lee’s execution has been strong since the strategy’s inception, generating consistent and solid long-term returns.
Chloe Qu
Upgrade
Fund: Nomura Japan Strategic Value
Status: Upgrade
Rating: Bronze
The strategy is managed by experienced and long-tenured lead manager Kentaro Takayanagi, with support from a dedicated investment team and well-resourced in-house equity research team. Despite recent efforts to implement a number of process enhancements, the strategy’s performance has yet to meaningfully improve, so we believe these enhancements warrant careful monitoring. Under our new ratings framework, which places a greater focus on fees and benchmark-relative performance, the analyst rating for the fund’s cheapest R share class has been upgraded to Bronze from Neutral, while other share classes remain at Neutral.
Hiroaki Sato
Downgrades
Fund: First State Regional China
Status: Downgrade
Rating: Silver
We continue to have confidence in First State Regional China’s experienced and savvy portfolio manager Martin Lau, his strong supporting team, and a time-tested quality-focused investment process. Under our new ratings framework, which places a greater focus on fees and benchmark-relative performance expectations, the analyst rating for the Singapore-domiciled vehicle is lowered to Silver from Gold.
Germaine Share
Fund: First State Dividend Advantage
Status: Downgrade
Rating: Silver
We continue to have confidence in First State Dividend Advantage’s experienced and savvy portfolio manager Martin Lau, his strong supporting team, and a time-tested quality-focused investment process. Under our new ratings framework, which places a greater focus on fees and benchmark-relative performance expectations, the analyst rating for the Singapore-domiciled vehicle is lowered to Silver from Gold.
Germaine Share
Fund: Invesco Global Investment Grade Corporate Bond
Status: Downgrade
Rating: Neutral
Headed by lead manager Lyndon Man since 2013, the Invesco Global Investment Grade Corporate Bond strategy follows a thematic and relative value approach to investing. The credit team identifies long-term themes and trends in the credit market structured around five risk factors: capital structure, sector, region, basis, and curve term structure. The strategy benefits from the breadth of resources at Invesco and employs a distinctive approach to credit investing, but the majority of the fund’s share classes are expensive given the fairly limited expectations for active managers to beat the Morningstar category index durably and on a risk-adjusted basis. Hence, under our new methodology, the analyst rating for the strategy’s clean share class (C, US dollar) is lowered to Neutral from Bronze. More expensive share classes are rated Negative.
Louise Babin
Fund: Robeco New World Financial Equities
Status: Downgrade
Rating: Neutral
We have downgraded Robeco New World Financial Equities to an analyst rating of Neutral from Bronze following two departures from its close-knit team. In December 2019, Robeco announced that co-manager Christian Vondenbusch and fintech analyst Jeroen van Oerle left the firm. As a result, the strategy is now under the sole responsibility of Patrick Lemmens. Although Lemmens is a specialist in the financials sector and has been the key decision-maker here since his arrival in October 2008, the loss of dedicated resources and their experience is a serious blow to the fund. In addition, Lemmens’ workload has increased as he now also manages the Robeco Global FinTech Equities strategy, which he launched with Van Oerle in 2017, by himself. Lemmens is stretched so thin that we no longer have a positive conviction on his ability to perform as well as before. Lemmens receives interim support from two portfolio managers, but they have other primary responsibilities. Robeco plans to backfill the vacant positions.
Jeffrey Schumacher
Fund: Schroder ISF Global Convertible Bond
Status: Downgrade
Rating: Neutral
Schroder ISF Global Convertible Bond is run by Peter Reinmuth, who has more than two decades of experience managing convertible-bond portfolios, and Chris Richards, who was named as co-manager in 2013. The duo is supported by two other managers, and the approach is primarily based on security selection. The managers screen the universe and select the most attractive convertible bonds within each region, based on the valuation of the underlying stocks as well as their technical characteristics. This bottom-up process has been executed in a consistent and successful manner over the years, but overall supporting resources are fairly slim. Under our enhanced ratings framework, which places a greater focus on fees and benchmark-relative performance, the analyst rating for the strategy’s clean share class (C) is lowered to Neutral from Bronze. Cheaper share classes are rated Silver and Bronze.
Evangelia Gkeka
