Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 79 interviews with investment professionals from 37 asset management groups over the course of March 2023.
Based on the intelligence gained during these meetings, and following reviews in the light of corporate announcements, the following actions have been taken.
New ratings
Janus Henderson Global Responsible Managed fund awarded Responsible A Rating
Square Mile’s team of analysts have introduced the Janus Henderson Global Responsible Managed fund into the Academy of Funds with a Responsible A rating. Launched in 2000, the fund invests in global equities and bonds, with a bias to the former. Responsibility for the fund sits with four portfolio managers across the equity and fixed income desks: Hamish Chamberlayne manages a global equity ex-UK sleeve whilst Andrew Jones runs a UK equity sleeve; Tim Winstone and Brad Smith are responsible for the strategy’s allocation to bonds.
The analysts consider this to be a sound offering for investors seeking to invest in a globally diversified multi-asset portfolio that seeks to achieve positive environmental and social outcomes by excluding harmful industries and fully integrating ESG considerations into the investment process. (Decision as at 21.03.23)
Fundsmith Sustainable Equity fund awarded Responsible A Rating
Square Mile confirms that the Fundsmith Sustainable Equity fund has entered the Academy of Funds with a Responsible A rating. The analysts note that it follows the same tried and tested philosophy and process as the Fundsmith Equity Fund, but with a greater emphasis on the environmental and social risks associated with stocks in line with the firm’s strict criteria. The fund invests in companies that the team believes should offer attractive long-term financial returns, with a primary focus on the exclusion of so-called ‘sin industries’ rather than a firm’s positive impact.
The analysts believe this fund to be a good option for investors that want a concentrated portfolio of high-quality global companies that also avoids businesses that are deemed to be lacking from an ESG perspective. (Decision as at 20.03.23)
abrdn Europe ex-UK Income Equity fund awarded Positive Prospect
Square Mile has introduced the abrdn Europe ex-UK Income Equity fund to the Academy of Funds with a Positive Prospect rating. The analysts consider this to be a promising proposition for long-term investors seeking exposure to European equities. They view the fund as benefiting from passionate co-portfolio
managers keen to grow their track record who apply a sensible investment strategy that focusses on identifying companies with good dividend paying potential. (Decision as at 14.03.23)
Ratings retained
Despite the news that Stuart Steven, Head of Sustainable Fixed Income and portfolio manager at Liontrust will retire in September 2023, Square Mile has retained the ratings on the following funds for which he is either manager or has responsibility for investment decisions:
· Liontrust SF Corporate Bond
· Liontrust SF Monthly Income Bond
· Liontrust SF Defensive Managed
· Liontrust SF Cautious Managed
· Liontrust SF Managed
· Liontrust SF Managed Growth
· Liontrust SF Global Growth
Whilst acknowledging Mr Steven’s experience will be a loss to the team, Square Mile’s analysts maintain their conviction in the funds based on the strong resources, long-established investment process and highly collegiate team-based management approach. Long standing co-portfolio managers Aitken Ross, Kenny Watson and Jack Willis remain in their roles, having spent several years working alongside Mr Steven. They do not anticipate a change in the fixed income investment process as a consequence of Mr Steven’s retirement and note the continued strength of the fixed income resources, which have been bolstered over recent years with additional credit analysts.
Square Mile would like to take this opportunity to congratulate Mr Steven on his long and successful career and wish him all the best in his retirement. (Decision as at 09.03.23)
Rating downgraded
Artemis US Select fund downgraded from AA to A rating
Square Mile views the Artemis US Select fund as a core US equity proposition with compelling attributes, particularly the manager’s dynamic cycle approach. While the analysts continue to believe that the process behind the fund will add value over time, they believe an A rating better reflects their current level of conviction in the strategy. (Decision as at 20.03.23)
Ratings removed
TT European Opportunities Long/Short fund: A rating removed
TT International Asset Management has confirmed that the TT European Opportunities Long/Short fund will be closed on 21.04.23. Square Mile’s analysts hold its co-managers, Dean Smith and Johan Fredriksson, in high regard and are therefore disappointed to receive this news. In Square Mile’s view, protecting investors’ capital is the most important characteristic in an absolute return fund, and this fund had been impressive in this regard, with a biggest ever peak-to-trough drawdown in its longest running share class of just 4.1%. However, returns had been modest over the last two years and the fund has struggled to attract inflows from new investors. With the closure of the fund imminent, Square Mile regrettably removes its A rating. (Decision as at 31.03.23)
CRUX European Special Situations fund: A rating removed
Square Mile’s has removed its A rating from the CRUX European Special Situations fund. The strategy has experienced a challenging period for performance over the medium term, which the analysts believe has been a key factor to a sizeable reduction in the fund’s assets. While recognising the experience of the fund’s managers, they have been disappointed in the return profile which has not been in line with expectations. As a result, their conviction has waned to a level where they feel the fund no longer warrants inclusion within the Academy. (Decision as at 31.03.23)
