Ratings retained
NN (L) Green Bond and the NN (L) Green Bond Short Duration funds retain Responsible A ratings
Following the announcement of the planned acquisition of NN Investment Partners by Goldman Sachs Square Mile has retained the Responsible A ratings on both the NN (L) Green Bond and the NN (L) Green Bond Short Duration funds. The acquisition is subject to regulatory approval and completion is anticipated by the end of the first quarter of 2022.
Square Mile’s analysts will discuss the acquisition with the funds’ investment team over the coming months. However, in their view these impressive funds are complementary to Goldman Sachs’s existing offerings and any impact on their investment propositions should therefore be minimal. (Decision as at 19.08.21)
Royal London Passive Changes: all four Recommended ratings retained
On the 9th August 2021, Royal London implemented the following changes to the four passive funds with Square Mile ratings.
Name Changes
| From | To |
| Royal London FTSE 350 Tracker Fund | Royal London UK Core Equity Tilt Fund |
| Royal London Asia Pacific ex Japan Tracker Fund | Royal London Asia Pacific ex Japan Equity Tilt Fund |
| Royal London Japan Tracker Fund | Royal London Japan Tracker Equity Tilt Fund |
Mandate Changes
The Asia Pacific and Japan Funds now aim to have a 30% reduction in carbon intensity relative to their respective benchmarks while the UK Core fund will look to have a 10% reduction in carbon intensity relative to its benchmark. Royal London will seek to achieve this by tilting the funds according to carbon intensity and ESG profile, holding slight overweight and underweight positions in stocks such that carbon intensity is reduced and ESG credentials improved relative to the benchmark. The funds will still seek to track their respective benchmarks, however these changes will mean that each fund’s tracking error will slightly increase. Square Mile believes that the higher tracking error is a fair compromise for the improvement in ESG credentials.
The changes suggested for the Royal London UK All Share Tracker were not approved and therefore there has been no change to the mandate for this fund.
Fee Changes
| Current Fund Management Fees
|
New Fund Management Fees
|
|
| Royal London UK Core Equity Tilt Fund | 0.13% | 0.10% |
| Royal London Asia Pacific ex Japan Equity Tilt Fund | 0.30% | 0.19%
|
| Royal London Japan Tracker Equity Tilt Fund | 0.25% | 0.14% |
| Royal London UK All Share Tracker | 0.15% | 0.11% |
(Decision as at 09.08.21)
Embark Horizon Multi-Asset fund range retain ratings
On the news that Lloyds Banking Group had acquired Embark Group, subject to regulatory approval, and following a meeting with Embark to discuss this, Square Mile’s analysts have maintained the ratings on the Embark Horizon Multi-Asset Fund range. This deal is expected to complete in the fourth quarter of 2021. Embark and its many subsidiaries, including the Horizon brand, will continue to operate as stand-alone businesses and therefore the analysts expect minimal changes to the Embark Horizon Multi-Asset Fund range. (Decision as at 05.08.21)
Rating suspended (pending further review)
Invesco Tactical Bond fund: rating suspended
Square Mile has suspended its rating on the Invesco Tactical Bond fund on the news that Jack Parker, the fund’s co-portfolio manager, will step down from his portfolio management responsibilities from 31st August while remaining on the team as senior portfolio strategist. Julien Eberhardt, fund manager and senior credit analyst, will assume the role of co-portfolio manager. The rating suspension will remain in place pending a review meeting with the newly announced manager. (Decision as at 25.08.21)
Rating removed (pending further review)
Royal London UK Equity Income – Rating Removed
Square Mile has taken the difficult decision to remove the Royal London UK Equity Income fund’s A rating. This rating was suspended in February 2021 on the news that the fund’s long-standing manager, Martin Cholwill, was to retire. After a short transition period, Mr Cholwill left the business at the end of May, with responsibility of the fund passing over to Richard Marwood.
Square Mile’s analysts acknowledge Mr Marwood’s lengthy experience and track record in running UK equities, however the fund’s rating was predicated on Mr Cholwill’s involvement on the strategy. They also believe that there will be some subtle differences in the way the fund will be managed in future and would therefore to prefer to see how these evolve over the coming months than to continue with a rating at this juncture. Once the changes in manager and approach have had time to settle in, they will review the fund and the broader team. (Decision as at 20.08.21)
