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Square Mile Academy of Funds: Ratings Round-Up for July 2022

Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 62 interviews with investment professionals from 35 asset management groups over the course of July 2022.

Based on the intelligence gained at these meetings and following reviews in the light of corporate announcements and developments, the following actions have been taken.

New ratings 

Man GLG Sterling Corporate Bond fund awarded Positive Prospect rating 

Square Mile’s team of analysts has awarded the Man GLG Sterling Corporate Bond fund a Positive Prospect rating. They consider its lead manager Jonathan Golan to be a talented fixed income manager with a positive track record spanning four years at his previous company. Mr Golan joined Man GLG in July 2021, where, along with his new team, he has continued to deliver strong returns in sterling corporate bond strategies.

Unlike many other funds in its sector, this fund’s edge lies in its bottom-up focus on smaller issuers and the team’s ability to extract alpha from undervalued credits that are overlooked by larger-scale investors. (Decision as at 20.07.22)

ASI Fixed Income Passive Range awarded Recommended Rating 

Square Mile has introduced five fixed income passive funds from abrdn to the Square Mile Academy of Funds. Recommended ratings have been awarded to the ASI Global Corporate Bond Tracker, ASI Short Dated Global Corporate Bond Tracker, ASI Sterling Corporate Bond Tracker, ASI Global Inflation-Linked Bond Tracker and ASI Short Dated Global Inflation-Linked Bond Tracker funds.

The ASI Sterling Corporate Bond Tracker aims to track the Markit iBoxx GBP Non-Gilts Overall Total Return Index while the remaining four track the performance of a dedicated suite of Bloomberg Fixed Income Indices.

These ratings recognise Square Mile’s high regard for abrdn’s passive team. The funds are competitively priced, and the analysts believe that they will track their respective benchmarks to within an acceptable range. (Decision as at 19.07.21)

HSBC FTSE All World fund awarded Recommended Rating 

Square Mile’s analysts have awarded the HSBC FTSE All World fund a Recommended rating, complementing the eight passive funds from HSBC Asset Management which currently hold Square Mile ratings. This fund looks to track the performance of the FTSE All World Index which compromises over 4,000 companies from nearly 50 different countries, across both developed and emerging economies. It will typically have a weighting of approximately 60% to US-domiciled companies. This rating reflects Square Mile’s high regard for HSBC’s passive team. Moreover, the fund is competitively priced and should track its benchmark to within a reasonable range. (Decision as at 08.07.22)

Ratings retained 

Royal London UK All Share Tracker fund retains its Recommended rating 

Royal London has received shareholder approval to merge the Royal London UK All Share Tracker Fund into the Royal London UK Broad Equity Tilt fund. The Royal London UK Broad Equity Tilt fund, launched in December 2021, implements small off-benchmark tilts incorporating Responsible Investment and ESG insights into its process while maintaining the same risk and return characteristics as the FTSE All Share. Given these tilts, Square Mile’s analysts expect the UK Broad Equity Tilt fund to have a slightly higher tracking error than the UK All Share Tracker Fund, although still within a reasonable range.

Square Mile views this merger as a sensible step as the size of the original fund has declined over the last nine months. Given the new fund has now reached a suitable level of assets and availability to clients, Square Mile confirms that the Recommended rating will be transferred to the new fund post- merger. (Decision as at 28.07.22)

GAM Star Japan Leaders fund retains its A rating 

Square Mile’s analysts have reviewed the GAM Star Japan Leaders fund on the news that its co-portfolio manager, Reiko Mito, is to leave the firm at the end of August.  Whilst this was an unexpected development, and Ms Mito’s departure represents a loss in terms of expertise and resource, the fund’s lead manager and architect of the strategy, Ernst Glanzmann, remains in situ and continues to be ably supported by investment manager, Lukas Knueppel.

GAM Investments plans to replace Ms Mito in the near future and the analysts remain happy with the interim team structure.  They have therefore decided to retain the fund’s A rating. (Decision as at 19.07.22)

Columbia Threadneedle Investment: ratings retained following fund name changes 

In July 2022, Columbia Threadneedle Investments re-named several funds in line with the firm’s global brand. However, this has not impacted the investment approach of any of the funds and therefore the following ratings remain unchanged:

 

Old Fund Name New Fund Name Square Mile Rating 
Threadneedle European SelectCT European Select

A

Threadneedle High Yield BondCT High Yield Bond

A

Threadneedle Managed Equity & BondCT Managed Equity & Bond

A

Threadneedle Managed Equity FocusedCT Managed Equity Focused

A

Threadneedle Managed EquityCT Managed Equity

A

Threadneedle UK Equity IncomeCT UK Equity Income

AA

Threadneedle UK Social BondCT UK Social Bond

Responsible Positive Prospect

(Decision as at 18.07.22)

Artemis UK Special Situations fund retains A rating 

At the end of June 2022, Artemis confirmed that Derek Stuart, co-manager of the Artemis UK Special Situations fund who has managed this fund since inception, will step back from day-to-day fund management at the end of 2023. Co-manager, Andy Gray, who has been involved with the fund since 2014, remains in situ. In addition, and as part of the transition planning, Henry Flockhart, previously a fund manager at Aviva Investors and Aberdeen Standard Investments, joined the team in July 2022.

Square Mile’s analysts note that Mr Stuart’s departure represents a material loss of experience from the fund and as Mr Flockhart is new to the approach and the firm, the analysts will meet the team over the coming months to discuss the transition period and the future structure of the portfolio. However, they have decided to retain the fund’s A rating in the interim. (Decision as at 01.07.22)

Rating removed 

PIMCO Select UK Income Bond fund loses A rating 

Square Mile has removed its A rating from the PIMCO Select UK Income Bond fund. The strategy has experienced a challenging period of performance in recent years, accompanied by a sizeable decline in assets. Whilst Square Mile’s analysts no longer have sufficient conviction in this fund for it to retain its rating, they continue to believe investors can benefit from PIMCO’s impressive fixed income capabilities in various other strategies managed across their business. (Decision as at 14.07.22)

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