Across December 2023 and January 2024, Morningstar’s fund research analysts have made some noteworthy changes and brought in two new ideas to their qualitative Medalist Rating. Morningstar’s forward-looking Rating is an expression of a fund’s potential to outperform in the future.
Commenting on these latest changes, Jonathan Miller, head of UK manager research, Morningstar, said:
“As part of our qualitative assessment, analysts cover funds across asset classes, regions, and differing styles. Some of our newer ideas are linked to the UK, where we’ve seen changes of late and fund manager retirements. When it comes to portfolios run by Morningstar Investment Management, we are overweight UK in our MPS and last year also introduced dedicated exposure to UK mid-caps. Valuations have become progressively cheaper and we also see scope for further corporate dividend growth, which we believe will help drive a rerating of share prices.”
“The execution of Fidelity European by Sam Morse has been impressive. This has resulted in consistent outperformance and a platform for long-term success. Therefore, we have upgraded its rating from silver to gold.”
Upgrades
Fidelity European has gone to a Morningstar Medalist Rating of Gold from Silver. Sam Morse’s exceptional execution of this well-thought-out process had helped the strategy to outperform on the downside on a consistent basis, thus providing a platform for long-term success.
Man GLG Japan Core Alpha has been upgraded to Bronze from Neutral. Since Jeff Atherton took over as lead portfolio manager in January 2021, he has made some important process enhancements that have been applied to good effect.
Downgrade
WS Lindsell Train UK Equity and its sister strategy, Finsbury Growth & Income, both now hold a Morningstar Medalist Rating of Bronze, from Silver. Nick Train follows a well-defined investment philosophy but with market liquidity concerns amid outflows, he has become gloomier on small caps and mid-caps. Morningstar analysts believe the desired narrower focus from here raises some questions on how the team will be working on its true best ideas and make the most of its skill set.
New Coverage
We initiated coverage on two funds, Janus Henderson UK Responsible Income and JPM UK Equity Core, both with a Morningstar Medalist Rating of Bronze.
For Janus Henderson UK Responsible Income, the analyst team has a positive opinion on lead manager Andrew Jones. The fund implements a strict ethical screen but valuation is integral to the process. The process has been consistently implemented over many years and has had a strong performance profile, with the portfolio being quite different to the peer group.
JPM UK Equity Core is led by James Illsley and is a low-cost benchmark aware strategy. The approach takes small overweight positions in what are deemed to be quality businesses that are attractively valued and whose outlook is promising, whilst also taking small underweight positions in stocks not meeting these characteristics. The process has been consistently implemented over many years and has had a strong performance profile.
Rerated from Under Review
Artemis Strategic Bond and Jupiter UK Mid Cap both saw manager changes and now have Morningstar Medalist Ratings of Neutral.
The Artemis fixed income team saw lead manager Juan Valenzuela depart, as well as Rebecca Young. The new line up consists of current team members David Ennett and Grace Le, along with new hire Liam O’Donnell from abrdn. Given the changes at the helm, we need to build our conviction in the new team’s ability to successfully execute this flexible and unconstrained process.
On the Jupiter side, new lead manager Tim Service who replaced Richard Watts, has been a long-standing team member and manages the UK Specialist hedge fund, however, the bulk of his assets have been focused on the long / short space.
Placed Under Review
Jupiter UK Special Situations and Jupiter Income, as well as JOHCM UK Dynamic were placed Under Review following the announcement of the respective fund managers departing.
