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Morningstar fund ratings review – June 2020

Among several upgrades are Matthews Asia and Pimco and downgrades include i-Shares and Natixis.

Morningstar uses a new evaluation framework that places a greater emphasis 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.

The rating shown is for the main clean share class for products available for sale in Hong Kong and/or Singapore.


Fidelity European Dynamic Growth – Gold from Silver

We have a high opinion of Fabio Riccelli, the strategy’s skipper since November 2008, and our conviction has strengthened further after recent changes that have alleviated our previous concerns around Riccelli’s workload. Karoline Rosenberg was appointed co-portfolio manager on this strategy in January 2020 and took over the lead role on the Iberia fund from Riccelli. The duo remains well supported by Fidelity’s sizable research analyst team, leading to an upgrade of the people pillar rating to high. Under our enhanced ratings framework, which puts more focus on fees and expected benchmark relative performance, the strategy’s analyst rating has been upgraded from Silver to Gold for its cheapest share classes, while more expensive ones land at Silver.

Francesco Paganelli


Matthews China Dividend – Silver from Bronze

Matthews China Dividend benefits from an excellent pedigree, a distinctive and proven process, and other strengths, and these attractive traits result in the analyst ratings for both of its share classes being upgraded to Silver from Bronze under the enhanced ratings methodology.

William Samuel Rocco


Pimco Diversified Income – Gold from Silver

Pimco Diversified Income combines broad resources and a proven process to invest in credit globally. Under our enhanced methodology, analyst ratings on four of its share classes have been upgraded to Gold, while two are rated Silver and Bronze.

Eric Jacobson


Pimco Emerging Markets Bond – Bronze from Neutral

Pimco Emerging Markets Bond benefits from an enhanced process, but recent turnover on the investment team warrants caution. The fund’s institutional and I2 share classes earn an analyst rating of Bronze and its more expensive share classes earn a Neutral.

Karin Anderson


PineBridge Asia ex Japan Small Cap Equity – Silver from Bronze

PineBridge Asia ex Japan Small Cap Equity’s impressive lead manager Elizabeth Soon and the robust investment process continue to underpin our conviction. Soon has been at the helm of this strategy since December 2008 and has delivered outstanding results over her tenure. She also serves as head of Asia ex-Japan equities and is a seasoned portfolio manager with 31 years of investment experience. Soon is supported by the 23-member Asia ex-Japan equity team, which has 15 years of investment experience and six years of firm tenure on average. The team’s turnover has been high in recent years, and we continue to monitor the situation, although we are confident that Soon can continue to lead the strategy successfully given her experience and hands-on approach. The strategy follows a sensible and time-tested approach that looks for quality-growth companies at a reasonable valuation. It’s based on a well-codified process that classifies companies into several growth or mature categories depending on their maturity and cyclicality. Under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, an analyst rating of Silver is assigned to the cheaper share classes, including the clean share class Y, while the more expensive share classes carry a Bronze rating.

Samuel Lo


UBS ETF MSCI UK IMI SRI – Silver from Bronze

UBS MSCI UK IMI SRI offers a pragmatic approach to gain exposure to UK equities with a strong focus on environmental, social, and governance factors. The MSCI UK IMI Extended SRI 5% Issuer Capped Index is a soundly constructed, well-diversified, and representative benchmark for the global developed markets large- and mid-cap market. Active risk, as measured by tracking error versus the MSCI UK IMI parent index, was nearly 3% from May 2011 to May 2020. This means the fund’s risk/return profile can be expected to closely approximate the performance of broader UK stock indexes, such as the FTSE All Share, over the long term, but short-term performance can deviate. At 0.28%, the ongoing charge is above average compared with plain-vanilla UK equity exchange-traded funds, which levy ongoing charges from 0.04%. We have upgraded this fund’s analyst rating to Silver from Bronze.

Dimitar Boyadzhiev




iShares Core € Corp Bond ETF – Bronze from Silver

This remains a compelling option to gain broad exposure to the market of investment-grade-rated euro-denominated corporate bonds. The ETF tracks an index that provides wide diversification across sectors and issuers. The compounding benefits of low fees are a key plus and the strategy is expected to deliver returns above its Morningstar category average. But ultimately this is a market where experienced active managers may add value via targeted calls. In the context of our improved ratings framework and its focus on net return generation over multiple cycles, the analyst rating for this strategy is adjusted [downward] from Silver to Bronze.

Jose Garcia Zarate


Natixis US Equity Opportunities – Neutral from Bronze

Natixis US Equity Opportunities features distinctive subadvisors in a somewhat incongruous combination. Most share classes earn an analyst rating of Bronze, while the more expensive C shares are Neutral.

Katie Rushkewicz Reichart

Part of the Mark Allen Group.