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.
Analyst ratings for November
| Fund | Morningstar analyst rating | Previous Morningstar analyst rating |
| MFS Meridian Global Total Return | Bronze | – |
| Schroder ISF Global Multi-Asset Income | Bronze | – |
| Fidelity Asia Pacific Opportunities / Fidelity Asia Pacific Opportunity (Lux) | Bronze | – |
| Fidelity European Growth | Bronze | Neutral |
| Robeco High Yield Bonds | Gold | Silver |
| T Rowe Price Sicav Emerging Markets Equity | Silver | Bronze |
| Xtrackers MSCI Europe Index ETF | Silver | Bronze |
| Fidelity Greater China | Bronze | Neutral |
| Parvest Equity Russia | Bronze | Neutral |
| BGF World Energy | Neutral | Bronze |
Source: Morningstar
New ratings
1. MFS Meridian Global Total Return (available for sale in Hong Kong)
Coverage initiated with a Bronze rating. We think the fund is a solid allocation fund, which provides diversified exposure to stocks and bonds from around the world. Its main attraction is the solid and experienced team, which gives us conviction in the fund. The fund brings together 11 managers, many of whom have led other successful MFS strategies. On the equity side, Vipin Narula joined the roster in October 2017 and will take over for Ben Stone and Pablo de la Mata. Narula lacks portfolio management expertise, but has deep knowledge of MFS’ investment process after seven years at the firm.
-Matias Möttölä, associate director and manager research for multi-asset and alternatives
2. Schroder ISF Global Multi-Asset Income (available for sale in Hong Kong)
Coverage initiated with a Bronze rating. Lead manager Aymeric Forest has access to a wide range of quality resources within Schroders to manage this multi-asset fund, which aims to produce a 5% yield before fees with a risk similar to portfolio with 30% in equities and 70% in fixed-income. Among these resources are Schroder’s quantitative QEP equity team and a host of specialist teams within fixed income. While we find the investment process to be flexible enough to enable the fund to achieve its goals, we think the process still lacks an edge, and we have some concerns about downside protection.
-Matias Möttölä, associate director and manager research for multi-asset and alternatives
3. Fidelity Asia Pacific Opportunities / Fidelity Asia Pacific Opportunities (Lux) (available for sale in Hong Kong and Singapore)
Coverage initiated with a Bronze rating. This is a distinct offering whose prospects lie squarely with portfolio manager Anthony Srom, who is the lead manager since June 2014 for the Sicav and since launch of the UK-domiciled fund. Srom has been with the firm for 11 years, following the typical Fidelity career path as an analyst before making the move to portfolio manager. He uses the analyst team as a starting point but does the majority of the heavy lifting himself. A firm’s suitability is determined on three criteria – company fundamentals, market sentiment and valuation. To make the grade a firm typically needs ticks in at least two of the three factors, together with an expected total shareholder return of at least 10% per annum.
The portfolio has a distinct contrarian bias and is index-unaware (the portfolio is zero weight dominant technology names like Samsung Electronics, Tencent and Alibaba), with a maximum of 35 names. This can result in periods of underperformance as seen in late 2016, but the overall track record thus far is impressive, relative to both peers and the MSCI AC Asia Pacific ex-Japan index. The only potential blight is the fee where Fidelity could do a better job for investors. That said, we believe the fund’s prospects are promising.
-Mark Laidlaw, senior analyst for manager research
Upgrades
1. Fidelity European Growth (available for sale in Hong Kong and Singapore)
Upgraded to Bronze from Neutral. Matt Siddle took the reins of the fund in July 2012. He has followed the typical investment career at Fidelity, starting as an analyst in 1999 and becoming a fund manager after a few years. Today, Siddle has the support of a deeply resourced analyst team, and we think he has made good use of its input over the years. We’ve also become increasingly confident that he can handle the fund’s large asset base. His low-turnover approach is helpful in that regard.
-Mathieu Caquineau, senior analyst for manager research
2. Robeco High Yield Bonds (available for sale in Hong Kong)
Upgraded to Gold from Silver. Managers Sander Bus and Roeland Moraal have successfully applied a prudent and time-tested approach at this fund. Strong bottom-up selection is complemented by modest but skillful credit beta management, all at below-average fees that reflect the strong stewardship of the parent company. The fund has outperformed peers and its index consistently, landing in the top decile of its Morningstar category over the trailing three, five, and 10 years through September 2017. This success has not gone unnoticed by investors, and the assets under management of Robeco’s high-yield team have grown to nearly €9.5bn ($11.16bn). We are reassured that Robeco, a strong steward of investors’ capital, is keeping a careful eye on the strategy’s capacity and liquidity and that it is dedicated to protecting existing shareholders. All in all, this fund is one of our favourites in the category.
-Niels Faassen, senior analyst for manager research
3. T. Rowe Price Sicav Emerging Markets Equity (available for sale in Hong Kong)
Upgraded to Silver from Bronze. We have upgraded the fund’s analyst rating, underpinned by our increased conviction in fund manager Gonzalo Pangaro, who is backed by a large and experienced team. At the end of 2015, Pangaro’s co-pilot and Asia specialist Mark Edwards retired. The transition has been smooth, and Pangaro’s strong stock-picking in Asia over the last 18 months bolstered our confidence in the fund. Under Pangaro, the fund has consistently employed a well-proven investment process that targets industry leaders with strong growth prospects. The portfolio strikes the right balance between conservative and aggressive bets, helping performance in various market environments.
-Mathieu Caquineau, senior analyst for manager research
4. XTrackers MSCI Europe Index ETF (available for sale in Singapore)
Upgraded to Silver from Bronze. We view this fund as a strong option to add core exposure to continental Europe including the UK. With around 450 stocks, the MSCI Europe Index covers approximately 85% of the European investible market and has proved to be a very difficult opponent for the average peer to beat. It is well-representative of the Morningstar Europe Large cap category with a modest orientation towards larger companies. At 0.25%, the fund is cheap compared with other European offerings.
-Dimitar Boyadzhiev, analyst for manager research
5. Fidelity Greater China (available for sale in Hong Kong and Singapore)
Upgraded to Bronze from Neutral. We have strengthened our conviction in portfolio manager Raymond Ma, who has managed the fund since July 2012 and brings 17 years of experience to the table. He continues to impress us with his expertise in the consumer and IT sectors, and has steadily broadened his knowledge across the other sectors, which we feel is important in running this fund. We are also reassured to see that he has consistently used the bottom-up, growth-focused investment process to good effect, and have diversified the fund’s sources of alpha across a few sectors in recent years.
-Germaine Share, associate director for manager research
6. Parvest Equity Russia (available for sale in Hong Kong and Singapore)
Upgraded to Bronze from Neutral. This fund is managed by TKB Investment Partners. Following the acquisition of TKB Investment Partners by Anatoliy Gavrilenko in August 2015 and the departure of co-portfolio manager Igor Danilenko in the same month, we lowered the people rating to Neutral from Positive. However, we remained positive about the quality of this team. The well-resourced team, led by the experienced Vladimir Tsuprov, has remained stable and was even strengthened in 2017 with the addition of a research analyst, so we are moving our people rating back to Positive. Furthermore, we haven’t seen any indication that the ownership change affected the fund’s effective and thorough process. Now that we have seen stability in the team and process, our conviction has been restored.
-Ronald van Genderen, analyst for manager research
Downgrades
1. BGF World Energy (available for sale in Hong Kong and Singapore)
Downgraded to Neutral from Bronze. BGF World Energy is now led by Alastair Bishop who became sole named manager in April 2017, when long-time co-manager Poppy Allonby decided to relinquish her portfolio management responsibilities. Bishop joined the team as an energy analyst in 2010 and was appointed co-manager in November 2015.
Since September 2017, he has been working alongside the newly hired co-manager Mark Hume who joined the group from First State after a seven-year stint within the global resources team. The duo is supported by a team of two dedicated analysts who have been hired in the last two years. Though we acknowledge there are more resources in place now with significant knowledge of the energy sector, neither Bishop nor Hume has much of a track record as a portfolio manager and the overall team has not worked together for long on this strategy.
Additionally, we note that the fund’s ongoing charge on its “clean” share class relative to those on other energy equity funds is extremely high. These factors cause an element of uncertainty with regard to the future potential of this fund to outperform.
-Fatima Khizou, analyst for manager research
