Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 69 interviews with investment professionals from 35 asset management groups over the course of May 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.
Sarasin Responsible Corporate Bond fund awarded Responsible A Rating
Square Mile’s team of analysts have introduced the Sarasin Responsible Corporate Bond fund into the Academy of Funds with a Responsible A rating. In awarding the rating, the analysts highlighted the barbell approach employed by the managers to optimise investment returns alongside strong ESG credentials as an appealing characteristic.
They note that by combining lower beta impact themes with higher beta credit exposure within industrial and financial sectors, the fund has the potential of delivering positive social and environmental outcomes while maintaining the risk and return characteristics of the sterling corporate bond market. (Decision as at 10.05.22).
Fidelity Moneybuilder Income fund retains A rating following change of name and policy.
On 26 May 2022, the investment policy of the Fidelity Moneybuilder Income fund changed to incorporate a sustainable investment focus and it joined Fidelity’s sustainable fund range. Consequently, the fund’s name also changed to the Fidelity Sustainable MoneyBuilder Income fund.
ESG considerations will now be formalised and enhanced within the process to take into account exclusions, integration and engagement. The fund’s philosophy and investment team remain the same. Square Mile has therefore adjusted the fund’s ESG assessment, and the analysts will continue to monitor the impact to the management of the fund. The fund’s A rating remains unaltered. (Decision as at 30.05.22)
Fundsmith Equity fund retains AAA rating
While Fundsmith is reported to have been served a Section 166 notice by the FCA, as details have not been published by either the FCA or Fundsmith, Square Mile is currently unable to ascertain any ramifications for the Fundsmith Equity fund. Square Mile’s analysts remain in dialogue with the group and will continue to monitor the fund closely.
At present, the Fundsmith Equity fund remains open to investors and retains its place within the Square Mile Academy of Funds. Square Mile will provide an update as and when further information is available. (Decision as at 06.05.22)
Threadneedle UK Social Bond fund downgraded from Responsible AA to Responsible Positive Prospect rating
Square Mile’s analysts have reviewed the Threadneedle UK Social Bond fund ahead of Tammie Tang assuming lead portfolio management responsibilities from Simon Bond, with effect from the 30th of June 2022. The analysts believe that many of the strategy’s strengths remain, particularly the well-considered social impact methodology and reporting.
However, the lowering of the fund’s rating from Responsible AA to Responsible Positive Prospect reflects the loss of the fund’s key architect. The analysts also note that there may be further team changes that could impact this fund given the ongoing integration of the BMO GAM (EMEA) business into Columbia Threadneedle Investments and they will continue to monitor any developments.
(Decision as at 06.05.22)
MI Somerset Global Emerging Markets fund loses AA rating
Square Mile has removed its AA rating from the MI Somerset Global Emerging Markets fund. The emerging markets sector is highly competitive with a range of skilled and well-resourced investors. The analysts feel, however, that this fund has faced challenges over recent years resulting in lacklustre returns.
Although the team has been bolstered through the recruitment of specialist Asian and China fund managers, analysts, and a new Head of Research, there has not been a material impact on performance, and Square Mile’s conviction in the fund has fallen. (Decision as at 24.05.22)