Morningstar Asia fund reviews and re-ratings – February

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.

Below are the analyst ratings for February 2016:

 Source: Morningstar

1. Fidelity Gl Infl Link Bd A-Acc-USD

We have moved the rating to Neutral. The fund was put Under Review (from a Bronze rating) following the news that co-manager Jeremy Church was leaving Fidelity. Lead manager, Andrew Weir, who has managed the fund since launch in May 2008, remains in-charge and is further supported by the new co-manager, Tim Foster. While we acknowledge Weir’s considerable experience in the inflation-linked space, some recent stumbles and below- benchmark returns over time have led us to lower our conviction in the fund. This is currently reflected through our Neutral rating.

— Ashis Dash, CFA, investment research analyst

2. Henderson Horizon Euro Corp Bond A2 Acc

We have reinstated the Bronze rating. The fund’s rating was previously Under Review following the news that manager Chris Bullock would be leaving Henderson at the end of 2015.

While Stephen Thariyan continues to serve as a co-manager, Tom Ross has taken over the day-to-day duties for the fund after Bullock’s departure. Although Ross was named manager on this fund only in August 2015, the three had worked closely for almost a decade managing a number of mandates together, including this fund since its inception. The management continuity provided by Thariyan and Ross along with a recently reinforced investment team, that continues to apply the same bottom-up focused approach, alleviate our concerns following Bullock’s departure.

–Ashis Dash, CFA, investment research analyst

3. Invesco Pan European Hi Inc A Acc

We have initiated coverage with a Silver rating. The fund is co-managed by Paul Read, Paul Causer, and Stephanie Butcher, who are very experienced investors and have been at Invesco for a long time. The portfolio typically invests up to 20% in equities.

The managers invest across the spectrum within fixed-income, backing their convictions aggressively, which sometimes includes significant exposure to subordinated financials, corporate high yield, hybrids and convertibles. In this regard, there have been periods when this fund has had the return profile of a higher-risk fund, but long-term performance has been excellent in risk-adjusted return terms, proving this team’s execution ability under this flexible investment process framework. Price is somewhat above median, but we are comfortable assigning a Silver rating.

–Javier Saenz de Cenzano, director of manager research Iberia and Italy

4. JPMorgan China A (dist) USD

We have assigned a Bronze rating after Howard Wang replaced Song Shen as lead portfolio manager on 1 January 2016. Wang has 20 years of investment experience and has proven his ability to add value in Chinese equities on the Bronze-rated JPMorgan Greater China, which he has managed for more than a decade. We expect Wang to run the China fund in the same manner as his successful Greater China fund, with a focus on secular growth stocks. Attractive fees further add to the fund’s appeal. This fund was previously placed Under Review. 

–Germaine Share, senior manager research analyst

5. JPMorgan China Pioneer A-Share

We have assigned a Neutral rating after the fund was put Under Review in December 2015 because of a change in lead manager. Song Shen replaced Lilian Leung as lead manager of the fund starting 1 January 2016. We know Shen from his former time on the JPMorgan China fund, which is focused mainly on H-shares. Shen has made several changes to the investment process, including increasing the fund’s concentration. Given Shen’s limited experience running A-share mandates, we need time to build comfort around the manager and changes to the investment process.

–Don Yew, manager research analyst

6. Schroder ISF Emerging Markets A Acc

Following the announcement that Allan Conway, fund manager and head of the emerging market equities team, will be retiring later this year, we have placed the Schroder Global Emerging Markets and Schroder ISF Emerging Markets funds Under Review. Both funds previously held a Bronze rating.

Tom Wilson, who has worked together with Conway at Schroders for a decade, will become head of emerging market equities. Wilson was promoted to the role of EM portfolio manager in November 2014, from the head of EMEA equities position that he held since 2007. The change is due to officially come into effect in August 2016, but there will be a period of transition leading up to that date. Moreover, Conway is committed to stay in an advisory capacity after his retirement. Although we believe there will be no change to the team-based approach and the rest of the team, including the three EM managers responsible for portfolio construction, we will be meeting with the team in due course to fully understand their future plans for the strategy.

–Lena Tsymbaluk, investment research analyst