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.
Analyst ratings for September
1. Fidelity Funds – Global Inflation Linked Bond Fund A-ACC-USD
The fund has been assigned a Neutral rating. Previously, it was placed Under Review following the announcement that lead manager, Andy Weir, was leaving Fidelity at the end of August 2016. Prior to that, it held a Neutral rating. Co-manager Tim Foster took over as lead manager after Weir’s departure and is supported by new co-manager Ian Fishwick.
Foster has close to a decade’s experience in managing cash and corporate credit funds, but only started managing inflation-linked mandates in late 2015. Moreover, he is also involved in managing around 20 funds spanning a wide array of fixed income strategies. In addition, while the broader process implemented by Weir remains in place, Foster has made some changes to it since taking over the fund.
All said, Foster’s limited experience in the inflation-linked space combined with his wide-ranging responsibilities, recent tweaks to the approach and the fund’s poor showing since 2011 give us pause for thought.
—Ashis Dash, analyst, manager research
2. Franklin Mutual European Fund A (acc) EUR
Given the quality and experience of its management team, as well as the long-term record achieved by its value strategy, the fund remains a very good option within the Europe large-cap value Morningstar category. But the higher level of risk displayed in recent years, combined with somewhat less effective stock-picking, make us think a Silver rating is more appropriate than the previous Gold rating.
–Matthieu Caquineau, CFA, senior analyst, manager research
3. HSBC Global Investment Funds – Chinese Equity Class AC
We have initiated coverage with a Neutral rating. Mandy Chan has managed this fund since 28 January 2011 and brings 20 years of investment experience. She is supported by a seven-member Hong Kong-based team that is fairly new and has experienced several departures in recent years. Given that the process depends on the team’s analysis to identify companies that have the potential to deliver the best earnings surprises on a one-year view, we would like more time to see how the relatively new team works together to contribute to the process.
Chan has delivered respectable peer-relative returns over her tenure so far, albeit with higher volatility than peers. Although this fund is led by an experienced manager and has a decent track record, we think that there are more-attractive options in a competitive Chinese equity category.
–Don Yew, analyst, manager research
4. Invesco European Growth Equity A
Coverage initiated with a Silver rating. The fund is the Luxembourg-domiciled clone of the US-sold fund Invesco European Growth AEDAX, which also has a Silver rating. We think this offering stands out among its Europe large-cap blend peers. This fund’s managers have three elements on their side: They have many years of experience, they’ve been working together as a team for more than a decade, and they stick with the same process that’s proven successful here and at sibling funds. The fund’s three-, five-, and 10-year returns through Aug. 31, 2016 all lie in the top quartile of its Morningstar category. While it is relatively more expensive than the category median, we think this fund is worth checking out.
—Francesco Paganelli, analyst, manager research
5. JPMorgan Funds – Emerging Markets Local Currency Debt Fund A (acc) – USD
Coverage initiated with a Neutral rating. The fund is run by experienced manager Didier Lambert, who heads JP Morgan’s local-currency team within the company’s 44-member global emerging-markets-debt team, led by Pierre-Yves Bareau. Lambert has built a solid long-term track record here and at a similar strategy that he managed at Fortis for three years before joining JP Morgan in 2009. We appreciate the structured process at work here, which integrates top-down and bottom-up research.
However, we are concerned about some recent departures from the team, including macro strategist Matias Silvani, who had contributed to the fund’s top-down positioning. The fund has struggled to outperform its peer group since the recent turnover, which has prompted us to assign a rating of Neutral until we can gain a better sense for how the manager and his team have weathered the recent departures.
—Shannon Kirwin, analyst, manager research
6. Schroder ISF Emerging Markets A Acc
The fund has been assigned a rating of Neutral. It was previously Under Review due to a change in the management team. Allan Conway, head of the emerging markets team and the architect of the process, retired in August 2016. Tom Wilson, who has been part of the team for around a decade, has become head of emerging markets. Wilson’s key responsibilities will include monitoring of the process implementation, chairing the strategy meetings and managing the team.
The process is unchanged and stock selection will continue to be the responsibility of the three emerging-markets managers (Robert Davy, Waj Hashmi and James Gotto) who have been part of the team working alongside Conway for more than 10 years. While we appreciate the team-based approach and stability of the wider management team, the fund’s fees are high. Given this is a benchmark-aware strategy, we believe this reduces the potential for future outperformance. This warrants a Neutral rating.
—Lena Tsymbaluk, analyst, manager research