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Morningstar Asia fund review – mid-January 2020

Schroders, JP Morgan Asset Management and M&G Investments are among the firms with re-evaluated products.

Morningstar has released the second round of 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.


Fund: Schroder ISF Asian Equity Yield 

Rating: Gold

The Schroder ISF Asian Equity Yield strategy has been led by best-in-class lead manager King Fuei Lee since its June 2004 inception. Lee, who has 20 years of investment experience, has consistently impressed us over the years with his insights on his holdings and on portfolio construction. Inspiring further confidence is the fact that Lee gets solid support from top notch co-manager Robin Parbrook as well as the broader Asia-Pacific ex-Japan investment team, one of our favorites in the region. Reflecting our increased conviction on Lee, the strategy’s “People” rating has been upgraded to high from above average. This, coupled with a robust and differentiated approach that already merits a high “Process” rating, drove the Morningstar Analyst Rating to Gold from Silver for the strategy’s cheaper share classes,including the C Acc USD clean share class, while the more expensive share classes land at Silver.

Samuel Lo



Fund: JPM US Select Equity

Rating: Bronze 

JPM US Select Equity benefits from a strong manager, but a change in the implementation of its process and uneven stock-picking by the analysts warrant a downgrade of its cheapest share classes’ Morningstar Analyst Rating to Bronze from Silver. The strategy’s most-expensive share classes earn a Neutral rating. In April 2019, the fund’s implementation of the process changed, as the multisleeve approach was abandoned, giving lead manager Scott Davis full responsibility for the strategy. The research process remains unchanged, but the portfolio now fully reflects Davis’ highest convictions and has become more concentrated, with the number of holdings falling to 65 as of November 2019 from 147 at the end of April 2019. Davis’ sleeve has been the best-performing sleeve in the previous team, which is encouraging. Yet he still leverages on the research and ideas generated by the analyst team, whose stock-picking has been uneven over the past five years. Although this indicates that Davis’performance was driven by his strong execution and stock selection, the repeatability of this success can be questioned as he still leverages on the analyst recommendations that overall have not added value. On balance, the combination of competitive fees and a more concentrated strategy that reflects the highest convictions of a skilled manager does give us confidence in the strategy’s potential to generate alpha versus the Russell 1000 Index, though its more-expensive share classes are less likely to shine.

Jeffrey Schumacher


Fund: M&G (Lux) Global Dividend

Rating: Bronze 

M&G (Lux) Global Dividend benefits from the experience and expertise of portfolio manager Stuart Rhodes and a well-defined and sensible investment process. Under our new ratings framework, which places a greater focus on fees and benchmark-relative performance expectations, the Morningstar Analyst Rating for the fund’s clean C EUR Acc share class has been downgraded to Bronze from Silver. Cheaper share classes still earn a Silver rating, while more expensive share classes earn a Neutral rating.

Jeffrey Schumacher


Part of the Mark Allen Group.