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

by | Jan 5, 2023

Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 53 interviews with investment professionals from 35 asset management groups over the course of December 2022.

This brings the total number of meetings for the year to 783 across 128 fund groups, and as a result 20 new funds were admitted to the Academy of Funds in 2022.

Based on the intelligence gained during the December meetings, as well as a broader review of Strategic Bond funds within the Academy of Funds, the following actions have been taken.

New ratings

UBAM Positive Impact Emerging Equity fund awarded Responsible A Rating

Square Mile’s team of analysts has awarded a Responsible A rating to the UBAM Positive Impact Emerging Equity fund. Launched in May 2020, the fund follows a strong team-based approach to researching opportunities in both emerging and developed markets. The investment process is clear and thorough, and the knowledgeable managers have worked together for almost 20 years.

The analysts believe this fund to be one of the few compelling long-term impact focused strategies currently available. The commitment of governments to achieving the UN Sustainable Development Goals (SDGs) by 2030 will require significant investment in innovation and the fund is well-positioned to benefit from this trend as it seeks to invest in companies providing solutions to these challenges. (Decision as at 22.12.22)

Janus Henderson Global Sustainable Equity awarded Responsible A Rating

Square Mile has introduced the Janus Henderson Global Sustainable Equity fund into the Academy of Funds with a Responsible A rating. This is a diversified global equity strategy looking to generate capital growth through investing in companies that its managers believe provide solutions to environmental and social challenges. It is led by two experienced managers supported by a close-knit team which takes a collegiate approach to investing.

The fund pays equal consideration to both sustainability and financial returns. Investments must be linked to one of ten sustainable development themes, while avoiding companies in the most harmful industries. As a result of this process and its long-term focus, the fund will typically differ from its benchmark and its returns may therefore be highly variable at times. Overall, Square Mile believes this to be an attractive option for investors looking to invest in sustainable solutions providers without sacrificing financial returns. (Decision as at 1.12.22)

Rating upgraded

UBAM Positive Impact Equity fund upgraded from Responsible Positive Prospect to Responsible A rating

Square Mile’s analysts have upgraded the UBAM Positive Impact Equity fund from a Responsible Positive Prospect to a Responsible A rating. Following a team-based approach to research and investing, the managers of this pan-European fund seek to unearth companies that provide a positive impact to the environment or society through six themes which aim to resolve issues highlighted by the UN SDGs. The analysts have a high regard for the team, and their conviction in its capability and stability has increased, with the managers demonstrating a consistent process and approach throughout challenging times for economies and markets since the fund’s launch in September 2018. (Decision as at 22.12.22)

Ratings changes following review of the IA Strategic Bond sector

Over the course of 2022, Square Mile’s analysts conducted an extended review of the IA Strategic Bond sector. This has resulted in changes to the ratings awarded to various Strategic Bond funds within the Square Mile Academy of Funds.

The ratings of five funds have been upgraded from A to AA, as follows:

· M&G UK Inflation Linked Corporate Bond fund

· TwentyFour Absolute Return Credit fund

· Invesco Tactical Bond fund

· TwentyFour Strategic Income fund

· Janus Henderson Fixed Interest Monthly Income fund

Square Mile’s analysts believe that the management teams and investment processes at play within these strategies to be of an extremely high calibre and these upgrades reflect this high level of conviction.

The analysts have also taken the difficult decision to downgrade the BNY Mellon Global Dynamic Bond and BNY Mellon Sustainable Global Dynamic Bond funds from AA and Responsible AA to A and Responsible A ratings respectively. The analysts continue to believe that these are solid offerings within the lower risk end of the IA Strategic Bond sector. However, their conviction has been tempered over recent years as the funds’ active allocation and return profiles have not met their expectations for defensive strategies. (Decisions confirmed on 1.12.22)

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