The firm's “analyst rating” is forward-looking analysis.
On an annual basis, analysts review and if necessary re-rate the funds on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating.
The analyst rating differs from the firm's backward-looking “star rating”, which assigns 1 to 5 stars based on a fund's past risk- and load-adjusted returns versus category peers.
The Analyst Rating is based on the analyst's conviction in the fund's ability to outperform its peer group and/or relevant benchmark on a risk-adjusted basis over the long term. If a fund receives a positive rating of Gold, Silver, or Bronze, it means Morningstar analysts think highly of the fund and expect it to outperform over a full market cycle of at least five years.
The Analyst Rating is not a market call, and it is not meant to replace investors' due-diligence process. It cannot assess whether a fund is the right fit for a particular portfolio and risk tolerance. It is intended to supplement investors' and advisors' own work on funds and, along with written analysis, provide forward-looking perspective into a fund's abilities. It picks up where commonly watched measures of the past leave off.
1. Franklin Mutual Global Disc A Acc $
We have downgraded the European version of the fund to Bronze. The fund was previously rated Silver. Although we maintain a positive conviction in the fund’s ability to stand out relative to its Morningstar Category average over a full market cycle and still have a high opinion of the seasoned leadership at its helm, investors should note that this fund is not managed as a clone of the US-sold version (MDISX, rated Silver). As such, the differences across these funds might lead to divergences in terms of performance. The SICAV fund´s execution during the managers’ tenure has not been impressive, and, unlike the US fund, it’s more expensive than the median peer in its category. Although we still think that the fund is a strong choice for contrarian investors, a number of factors make this version relatively less compelling than the US-sold fund, and we believe a Bronze rating provides a better reflection of our current conviction in the product.
-- Francesco Paganelli, fund analyst
2. Perkins US Strategic Value A USD Acc
We have moved the Perkins US Strategic Value fund to a Neutral. The fund was previously rated Bronze. Although the fund has a reasonable long-term track record, medium-term performance has been disappointing. In recognition of this, the group has made alterations to the stock research process, portfolio construction and indeed personnel. Due to the amount of change, we do not have the level of confidence required to award the fund a positive rating at this time.
-- Simon Dorricott, fund analyst
3. Parvest Equity Russia P C
We have placed Parvest Equity Russia under review after learning that the ownership structure of the parent company has changed. The fund used to be managed by TKB BNP Paribas Investment Partners (JSC), a joint venture between BNP Paribas Investment Partners and non-state pension fund Blagosostoyanie, a financial structure controlled by Russian Railways. In June 2015, both parties exited the company and Anatoly Grigorievich Gavrilenko, a private investor and chairman of the supervisory board of Alor Group, consolidated a 100% stake. In the upcoming period, we would like to get a better view of the nature of this transaction.
-- San Lie, director of fund analysis
4. Invesco Asia Balanced A Acc
Following the departure of fixed-income portfolio manager Frankie Tai, we are placing the fund Under Review. Effective 10 July 2015, Ken Hu, the firm’s CIO for Asia-Pacific fixed income, has taken over the fixed-income portion of the fund, while equity portfolio manager Andy Wong remains at the helm. We will meet with Hu in due course to update our rating on the fund. The fund was previously rated Neutral.
-- Germaine Share, research analyst