Analysts at Square Mile Investment Consulting and Research (Square Mile) conducted 76 interviews with investment professionals from 42 asset management groups over the course of the third quarter of 2023.
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
BlackRock MyMap Range awarded Recommended rating
Square Mile’s team of analysts have introduced the BlackRock MyMap Fund range into the Academy of Funds with a Recommended rating. This low cost, multi-asset, risk managed fund range consists of four funds, each having a clear set of risk-objectives measured by volatility targets over a five-year period. They are actively managed, principally driven by the team’s proprietary systematic investment tools.
Square Mile believes that the fund range provides a robust option for investors looking for a low-cost investment solution, offering a diversified exposure to global investment markets. The range benefits from the extensive resources of the group, including their market leading index fund and ETF business, iShares, and extensive risk management resources. (Decision as at 21.9.23)
TM Redwheel Global Equity Income fund awarded A rating
Square Mile has awarded the TM Redwheel Global Equity Income fund an A rating. This high conviction global equity income mandate is managed by Nick Clay and deputy-manager Andrew MacKirdy, both of whom have considerable equities management experience and have worked together since 2012.
The fund has exhibited a good performance track record since its launch at Redwheel in November 2020 and has a longer, robust record in the form of a composite including the managers’ time at BNY Mellon. It is underpinned by a simple philosophy that the compounding of dividends is statistically the most significant driver of long-term equity returns. The fund maintains a strict yield discipline ensuring that every stock always compounds at a higher yield than that of the market. A focus on cash flows and business models with an “ability to suffer” underwrites the consistency of the income return and adds a quality component to its process.
The fund (and its longer-term composite) has exhibited consistent resilience in market drawdowns because of its more defensive nature. However, it might be expected to underperform when the market is driven by growth factors or dominated by stocks which place less importance on dividends. The strategy has a good distribution history and maintains a strong yield. Square Mile believes it to be suitable for investors seeking a robust dividend stream from a global mandate, but with a total return mindset and a lower volatility profile than the broader market. (Decision as at 18.9.23)
Lindsell Train North American Equity fund awarded Positive Prospect
Square Mile has introduced the Lindsell Train North American Equity fund into the Academy of Funds with a Positive Prospect rating. This fund is the newest launch from Lindsell Train and is managed by James Bullock, who joined the firm in 2010, supported by deputy portfolio manager, Madeline Wright. It follows the same philosophy and process of investing in high quality companies that have become synonymous with Lindsell Train.
The analysts believe the fund’s approach could appeal to investors seeking a focus on quality within their North American equity exposure. However, to achieve a full rating, they would like to see growth in the fund’s assets, alongside the fund meeting its expected outcome over a more meaningful timeframe. (Decision as at 18.9.23)
Lord Abbett Climate Focused Bond fund awarded Responsible Positive Prospect
Square Mile’s analysts have awarded Lord Abbett Climate Focused Bond fund a Responsible Positive Prospect rating and it joins the Academy of Funds. This fund follows a thematic approach, investing in issuers and projects that the manager believes will have a positive impact on the climate. The analysts note that it benefits from a strong fixed income team and a well-structured sustainability process.
They consider this to be attractive to investors looking for exposure to a global, core, fixed income strategy, targeting positive environmental outcomes within its investments. For the fund to achieve a full rating the analysts would like to see a larger, more diversified, investor base, alongside the continued delivery of solid financial and impact outcomes. (Decision as at 22.8.23)
Ratings upgraded
LF Havelock Global Select fund upgraded to an A rating
Square Mile has upgraded the rating of the LF Havelock Global Select fund from a Positive Prospect rating to an A rating. Since launch five years ago, the fund has consistently outperformed its benchmark, the MSCI Enhanced Value index. The analysts also note that the growth in the fund’s AUM grow means that as a firm Havelock London now generates profit on a monthly basis. They believe the approach the fund manager Matthew Beddall adopts is sensible – a data driven process with a qualitative overlay. This fund is suitable for long term investors looking obtain exposure to global value stocks. (Decision as at 13.9.23)
CT UK Social Bond fund upgraded to Responsible A rating
Square Mile has upgraded the CT UK Social Bond fund from a Responsible Positive Prospect to a Responsible A rating. The fund has continued to deliver consistent investment returns and positive social outcomes since Tammie Tang assumed the leadership role of the fund in May 2022 replacing long-standing manager Simon Bond on his retirement. Square Mile’s analysts believe that her sensible approach to managing money and desire to invest in social projects, with the support of an enlarged social impact investing team, ensures continuity to this successful impact strategy. (Decision as at 14.7.23)
Ratings retained
AXA Framlington Global Sustainable Managed fund retains A rating
Square Mile has decided to retain the A rating on the AXA Framlington Global Sustainable Managed fund, despite the news that Mark Healy has left the firm. He was jointly responsible for the fixed income allocation of the fund, alongside Nick Hayes, who remains at the firm. The fund has a structurally low exposure to fixed income, and the mandate on this portion of the portfolio is relatively inflexible. Jamie Forbes-Wilson and David Shaw also remain named managers for the strategy. The analysts therefore do not believe there will be any significant impact on the fund following Mr Healy’s departure. (Decision as at 11.9.23)
abrdn Global Corporate Bond Tracker fund retains rating; changes to Responsible Recommended rating
On 21st August, abrdn implemented changes to the abrdn Global Corporate Bond Tracker fund, renaming it abrdn Global Corporate Screened Tracker fund and changing its benchmark to the Bloomberg Global Corporate Screened Index (Hedged GBP). The new benchmark applies several exclusions based on ESG metrics, rejecting securities issued by companies that have breached the UN Global Compact principles and those involved in controversial weapons, thermal coal, oil sands, shale energy and tobacco. These exclusions represent broadly 10%-12% of the global corporate bond market.
Square Mile views these changes positively and has decided to change the fund’s rating from a Recommended rating to a Responsible Recommended rating to reflect the uplift in the fund’s ESG credentials. (Decision as at 30.8.23)
Ratings suspended
Fidelity Multi Asset Income fund: A rating suspended
On the announcement that lead manager Eugene Philalithis will retire from day-to-day fund manager responsibilities in March 2024, Square Mile’s analysts have suspended the fund’s A rating. Whilst acknowledging the continuity that co-managers George Efstathopoulos and Becky Qin and the broader multi-asset team bring to the strategy, they believe it is prudent to assess how the strategy evolves under the leadership of incoming manager Talib Sheikh. Square Mile will provide further updates following meetings with Mr Sheikh and his team.
Rating removed
Liontrust UK Equity fund loses A rating
On the news of the upcoming retirement of longstanding co-portfolio manager Chris Fields and that a second co-portfolio manager, James de Uphaugh, is to step down from the fund leaving Imran Sattar as its sole manager, Square Mile has taken the difficult decision to remove the Liontrust UK Equity fund’s A rating. The analysts consider this change of structure to be material as they have viewed this a ‘core’ offering and one which seeks to remain competitive across a range of market conditions. As such, the combination of three portfolio managers formed an attractive blended style of management which they believe will be lost with this restructuring. Square Mile acknowledges that Mr Sattar is an experienced and capable portfolio manager, but his appointment as sole manager fundamentally changes the nature and potential investor outcome of this fund. (27.9.23)
