New Ratings
iShares € Corp Bond 0-3yr ESG ETF – Silver
Jose Garcia Zarate
IShares Euro Corporate Bond 0-3yr ESG is a compelling option for investors seeking targeted maturity exposure to the market of EUR corporate bonds from issuers with vetted environmental, social and governance (ESG) credentials. In most cases, maturity-segmented strategies will be used to adjust the duration of the credit bucket of the portfolio. The accuracy of duration metrics, low portfolio turnover and low fees offered by passive funds are key positives and support a Morningstar Analyst Rating of Silver.
UBS China Allocation Opportunity – Bronze
Patrick Ge
We have initiated coverage on UBS China Allocation Opportunity, an all-China allocation fund. While the strategy benefits from a top-notch equity manager Bin Shi, who we know well and rate highly, we’re taking a more conservative view of the overall investment team given its asset allocator Gian Plebani’s lighter multi-asset experience relative to peers. Furthermore, while bond sleeve manager Ross Dilkes came across as a capable investor, the 10-member fixed income team has seen elevated turnover, which saw three departures since 2019.
We do like the investment process, with an allocation approach that is well-designed and has remained robust since inception, drawing on the strength of the multi-asset team’s research groups for ideas. What’s more, the strategy benefits from a buy-and-hold equity process and credit-focused fixed income approach that has seen success across each respective standalone strategy. Therefore, we have initiated coverage here with Average and Above Average ratings on the People and Process pillars, respectively. This leads to a Morningstar Analyst Rating of Bronze for the strategy’s clean share class Q, while more expensive share classes land at Neutral.
Upgrades
Ninety One UK Alpha – Silver from Bronze
Samuel Meakin
Ninety One UK Alpha is led by an experienced and capable manager executing a sensible approach and backed by a suitably resourced team. Under our enhanced ratings framework, which places a greater emphasis on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the I share class is upgraded to Silver from Bronze. Most other share classes are also rated Silver, while the most expensive is rated Bronze.
First State Global Listed Infrastructure (UK Domiciled) – Silver from Bronze
Fatima Khizou
First State Global Listed Infrastructure’s seasoned management team and broad resources, together with a consistent and robust approach, continue to make it an appealing offering in the space. Our positive view on the investment team and approach has not changed. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the B clean share class is upgraded to Silver. Ratings for the other share classes range from Bronze to Silver.
First State Global Listed Infrastructure (Ireland Domiciled) - Silver from Bronze
Fatima Khizou
First State Global Listed Infrastructure’s seasoned management team and broad resources, together with a consistent and robust approach, continue to make it an appealing offering in the space. Our positive view on the investment team and approach has not changed. However, under our enhanced ratings framework, which places a greater focus on fees and expected benchmark-relative performance, the Morningstar Analyst Rating for the VI clean share class is upgraded to Silver. Ratings for the other share classes range from Bronze to Silver.
Downgrades
DWS Deutschland – Bronze from Silver
DWS Invest German Equities – Bronze from Silver
Natalia Wolfstetter
Seasoned manager Tim Albrecht has long followed a flexible and bold investment style. While the approach can court volatility and temporary underperformance, he has the experience necessary to execute this strategy, and in the long run, the funds have rewarded investors for the higher risk taken. That said, the funds' ownership of Wirecard shares, their largest holding from October 2019 to April 2020, has shone a light on some weaknesses in risk management, which lowers our conviction in the process. With the greater focus on fees and benchmark-relative performance expectations in our enhanced ratings framework, the Morningstar Analyst Rating on the funds' clean and institutional share classes is downgraded to Bronze from Silver. The more expensive retail share classes land at Neutral.
Invesco Japanese Eq Advantage – Bronze from Silver
Invesco Japanese Equity Advantage is a disciplined and differentiated investment approach which benefits from seasoned leadership and consistent execution, but it comes at a price; as a result, its share classes earn Morningstar Analyst Ratings ranging from Neutral to Bronze in our enhanced rating framework, depending on fees. The process has generated strong returns, which has gathered admirers; inflows over time have elevated the strategy’s size and in turn company ownership levels, which bears watching.
Note: under the Morningstar methodology different share classes of funds may have different ratings
