4 New Fund Ratings

Allianz Oriental Income RT EUR - Bronze - Claire Liang, CFA

We are initiating coverage on Allianz Oriental Income with a Morningstar Analyst Rating of Bronze on its clean share class RT EUR. This strategy has been led by highly experienced portfolio manager Stuart Winchester since its inception in 1994. Winchester boasts 37 years of experience, 30 of them with Allianz. He came across as a passionate and hands-on investor, and we see his Japan investment credentials as well as his proven investment savvy in smaller-cap firms as key strengths for the strategy. The investment process is primarily bottom-up driven and focuses on firms with great growth opportunities, competent management teams, and sound cash flow and balance sheet strengths. A key distinguishing feature here is Winchester’s preference for underfollowed small/mid-cap stocks, and the portfolio typically has more than 40% of assets invested in small/mid-caps, compared with the less than 10% for the MSCI AC Asia Pacific Index. While capacity is something worth monitoring, we believe Winchester’s extensive investment experience, coupled with a differentiated and consistently applied investment approach, makes this strategy a good offering for investors seeking Asia-Pacific equity exposure.

Schroder ISF Global Sustainable Growth C Acc USD - Silver - Ronald van Genderen, CFA

We initiate coverage on Luxembourg domiciled Schroder ISF Global Sustainable Growth and United Kingdom domiciled Schroder Global Sustainable Growth with Morningstar Analyst Ratings ranging from Silver for the cheaper share classes to Neutral for the most expensive ones. The clean Schroder Global Sustainable Growth Z GBP Acc and Schroder ISF Global Sustainable Growth C Acc USD share classes both earn a Silver rating. The strategy is managed by co-managers Katherine Davidson and Charles Somers, a cohesive duo that has been working together for more than a decade and in our view have complementary skill sets and characters, who reside in Schroders’ experienced six-strong Global & International Equity team. The duo has effectively leveraged their supporting resources, giving the strategy an edge. The co-managers apply an approach that was incepted in November 2017 after the previous demographic-themed strategy was repositioned. The process is well-established and structured and has been left largely unchanged. While they typically focus on identifying well-entrenched companies with underappreciated growth prospects, thy also make room for shorter-term opportunistic plays which can be in more cyclical businesses. The co-managers implement their approach with conviction resulting in a concentrated and active portfolio that will typically be less growthier than many of its global large-cap growth Morningstar category peers. The track record of the current approach is very strong with a significant outperformance versus both peers and category benchmark, but it only stretches back to November 2017.

SPDR Bloomberg Barclays Euro Aggregate Bond ETF - Silver - Jose Garcia-Zarate

SPDR Euro Aggregate Bond is a compelling option for investors seeking a one-shop stop investment-grade fixed income solution for a EUR-denominated portfolio. The trade-off of taking a passive approach for such a broad market exposure is the lack of say in sector allocation. However, the stability of exposure and the dominance of the sovereign segment means that an index-tracking strategy better cushions the downside at times of market stress. The combination of stability of exposure and the compounded benefits of low costs are key positives and place the strategy in good stead to deliver returns over the category average over long periods. The strategy is awarded a Morningstar Analyst Rating of Silver.

Eastspring Investments Asian Equity Income - Neutral - Samuel Lo, CFA

Eastspring Asian Equity Income is managed by Pearly Yap, who took over the strategy in March 2020. She has 26 years of experience, and while she has been involved here since she joined the firm in 2011, her track record as the strategy’s lead manager is short. She leads the four-member Equity Income and Property focus team that directly supports this strategy and can also leverage the broader 15-member Core Equities desk, although the way that the team is organized creates some resourcing inefficiencies, in our opinion. This regional income strategy shifted from a more value-leaning, dividend focus to a core investment style in July 2020, and while it maintains the existing above-market dividend yield target, it extended the flexibility to invest in non-dividend-paying names. A number of growth-oriented, low-dividend-paying names have since been bought, resulting in a marked decline in the portfolio’s overall dividend yield and considerable changes to the portfolio’s makeup. Yap and her team’s investment capability beyond traditional dividend investing is relatively untested, and we have reservations around the paucity of guardrails as to how Yap manages the nondividend portion of the portfolio. We initiate coverage on the strategy with both People and Process ratings at Average, resulting in a Morningstar Analyst Rating of Neutral across all share classes.