Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 33 interviews with investment professionals from 20 asset management groups during July 2024. 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
M&G Positive Impact fund awarded Responsible A rating
Square Mile’s team of analysts has introduced the M&G Positive Impact Fund into the Academy of Funds with a Responsible A rating. Manager John William Olsen and his supporting team aim to invest in companies that pass their ‘III’ framework, which scores companies across three factors: Investment, Intention and Impact. This process leads the fund to be highly aligned with the UN Sustainable Development Goals while offering investors a relatively greater exposure to large-cap equities relative to other funds that invest in a similar manner. (Decision as at 18.07.24)
Colchester Local Markets Bond fund awarded AA rating
Square Mile has added the Colchester Local Markets Bond fund to the Academy of Funds with a AA rating. The fund boasts a strong track record over different market environments thanks to its long-established, repeatable investment process from an independent asset manager dedicated to investing in global government bonds. Square Mile’s analysts believe this to be an excellent option for investors looking to allocate capital to a strategy dedicated to emerging markets local bonds. (Decision as at 16.07.24)
Ratings upgraded
AXA Sterling Credit Short Duration and AXA Global Short Duration Bond funds upgraded to AA ratings
Square Mile’s analysts have upgraded the AXA Sterling Credit Short Duration and AXA Global Short Duration Bond funds from A to AA ratings. They note that lead portfolio manager Nicolas Trindade has built a strong track record since he started managing short duration strategies at AXA in 2010. Additionally, has ably managed the volatile fixed income markets of recent years with a cautious but flexible approach, limiting the drawdowns but capturing most of the market upside. The analysts therefore believe that AA ratings better reflect their increased conviction in these strategies. (Decision as at 22.07.24)
MAN GLG Sterling Corporate Bond fund upgraded from Positive Prospect to AA rating
Square Mile confirms the rating upgrade of the MAN GLG Sterling Corporate Bond fund from a Positive Prospect to a AA rating. The team of analysts have been impressed by the track record Jonathan Golan has delivered since the inception of this fund in September 2021. He has successfully incorporated additional drivers of performance within this strategy to further enhance performance relative to the positive track record he established at his previous investment house. Given the fund is focused on the lower credit quality area of the market, the analysts believe it would be better suited to income-oriented investors and those with a higher tolerance for credit risk. (Decision as at 15.07.24)
M&G Emerging Markets Bond fund upgraded from A to AA rating
Square Mile has upgraded the M&G Emerging Markets Bond fund’s rating from A to AA. This is primarily a reflection of the analysts’ growing conviction in Claudia Calich and Charles de Quinsonas as well as the strength of the team they have built around them. In their view, this fund could be considered a core component for investors wishing to access emerging market debt and they therefore believe a AA rating is more in line with their current opinion. (Decision as at 09.07.24)
Ratings retained
FTGF ClearBridge US Equity Sustainability Leaders fund retains Responsible A rating
On the news that Derek Deutsch, co-portfolio manager of FTGF ClearBridge US Equity Sustainability Leaders fund will retire at the end of 2024, Square Mile’s analysts have assessed the proposed new portfolio manager structure. At that point, the strategy’s dedicated portfolio analysts Benedict Buckley and Dimitry Dayen will become portfolio managers alongside incumbent co-portfolio manager Mary Jane McQuillen, who, alongside Mr Deutsch, were architects of this strategy. Mr Buckley has extensive knowledge of the strategy, having been a dedicated portfolio analyst since 2017, whilst Mr Dayen was promoted to portfolio analyst in January 2024 having been a sector analyst focusing on the renewables and industrials sectors.
The analysts believe this increase in decision makers to be a positive step, with Ms McQuillen providing suitable continuity and mentorship for the incoming portfolio managers. They have therefore decided to retain the fund’s Responsible A rating. (Decision as at 19.07.24)
BlackRock Continental European Income fund retains A rating
Square Mile’s analysts have confirmed that they have retained the BlackRock Continental European Income fund’s A rating, despite the news that Andreas Zoellinger, co-portfolio manager and longstanding member of the Fundamental European Equity Team, is to retire in the first quarter of 2025
Although the analysts view Mr Zoellinger’s departure as material, they are comforted by the level of continuity that will be provided by his co-manager, Brian Hall, who has worked closely with Mr Zoellinger since 2007. In addition, they are further encouraged by the news that Stuart Brown has joined the team and will become a co-portfolio manager on the strategy pending regulatory approval. The analysts know Mr Brown well, having previously managed the abrdn Europe ex-UK Income equity strategy which was rated by Square Mile prior to his departure. In view of these changes, they are confident that the strategy’s long-standing investment approach will remain unchanged and will continue to exhibit the same investment return profile they expect of it. They also hold BlackRock’s broader Fundamental European Equity Team in high regard, noting its depth and experience.
The analysts will meet the managers over the coming weeks to confirm their initial assessment of these management changes. They would also like to congratulate Mr Zoellinger on his long and successful career and wish him all the best in his retirement. (Decision as at 15.07.24)
Rating downgraded
Baring EM Debt Blended Total Return fund downgraded from AA to A rating
Square Mile has decided to downgrade the rating on the Baring EM Debt Blended Total Return fund from AA to A. While the analysts maintain their positive view on this strategy and its ability to deliver above-average returns across emerging debt markets, its medium-term performance has not been in line with expectations. They therefore feel an A rating is more reflective of their current conviction. (Decision as at 09.07.24)
Ratings removed
Lord Abbett Climate Focused Bond fund loses Responsible Positive Prospect rating
Following the news that Annika Lombardi, lead portfolio manager of the Lord Abbett Climate Focused Bond fund, will leave the firm to pursue other interests, Square Mile’s analysts have decided to remove the fund’s Responsible Positive Prospect rating. Whilst they acknowledge Lord Abbett’s strong resources and team approach, their rating was predicated on Ms Lombardi’s expertise and dedication to managing the strategy. (Decision as at 19.07.24)
UBAM Positive Impact Equity fund loses Responsible A rating
UBAM has announced the merger of the UBAM Positive Impact Equity fund, a pan-European strategy, into the UBAM Positive Impact Global Equity strategy with effect from 31st July 2024. Therefore, ahead of this merger, Square Mile took the decision to remove the fund’s Responsible A rating and it leaves the Academy of Funds. (Decision at as 08.07.24)
