The Teams for These 2 Bond Funds Are No Longer Top of the Heap
Here are some ratings highlights from January.
Morningstar analysts hit the ground running in 2022, with a flurry of ratings activity in January.
Morningstar updated the Analyst Ratings for 1,505 fund share classes, exchange-traded funds, and separately managed accounts/collective investment trusts in the first month of the year. Of these, 1,147 maintained their previous rating, 164 were upgraded, 31 were downgraded, 34 were added to coverage, and 129 came under review because of material changes, such as manager departures.
Looking through share classes and vehicles to their underlying strategies, Morningstar issued 309 Analyst Ratings during January. Of these, two were new to coverage, and the remainder had at least one investment vehicle that had been previously covered by a Morningstar analyst.
Below are some highlights of the upgrades, downgrades, and strategies new to coverage.
The Fidelity Advisor Freedom target-date series' robust management team earned a People rating upgrade to High from Above Average, bringing its Morningstar Analyst Rating to Silver, while some pricier share classes remain Bronze and Neutral. Andrew Dierdorf and Brett Sumsion comanage this series and implement changes based on their broader team's research. The duo brings ample asset-allocation experience, while the supporting team stands as one of the largest in the industry, with more than 60 professionals including 26 research-focused members. The team focuses on delivering a diversified and resilient glide path for investors farthest from retirement to those at and into retirement. The managers also have a plethora of compelling underlying funds to use. Within equities, they leverage strategies run by well-regarded managers like Will Danoff and Jed Weiss. Within bonds, firm veteran Ford O'Neil's investment-grade bond strategy gets the most assets.
Improved manager decision-making at the American Funds Target Date Retirement series earned it an overall upgrade to Gold from Silver for its cheapest share classes, while its remaining shares range between Silver and Neutral depending on fees. The series' recently revamped multi-asset group has made tangible, beneficial changes. Previously, its portfolio construction approach lacked rigor. Yet in January 2020, American Funds' parent Capital Group created the Target Date Solutions Committee to oversee this series and enhance its quantitative capabilities. This produced sensible glide-path changes in April 2021 after extensive research. Series leaders Michelle Black and Brad Vogt increased its geographic flexibility in its equity sleeve by trimming several region-specific strategies for more global, go-anywhere funds. Morningstar Medalists constitute more than 90% of the series' assets, a remarkable feat that speaks to the strength of American Funds' menu of strategies.
Harbor Bond's HABDX name and manager changes resulted in a People Pillar downgrade to Average from High and an overall rating downgrade to Bronze from Gold for two share classes, and to Neutral from Silver for another. Harbor Bond will become Harbor Core Plus and subadvisor Income Research + Management (IR+M) of Boston will take over from Pimco, which had run the fund since its 1987 inception with the same strategy as Pimco Total Return PTTRX. Harbor hopes to distinguish this fund from so-called core offerings. IR+M's investment team is experienced, but on the smaller side given the breadth of its investment universe. The process is rather straightforward. It avoids interest-rate and yield-curve bets, does not use derivatives or emerging-markets debt, buys only dollar-denominated issues, and takes no foreign-currency exposure. Harbor will also slash expenses across all share classes.
TCW Emerging Markets Local Currency Income's TGWIX People Pillar dropped to Above Average from High, bringing its overall rating to Bronze from Silver. Although the management team remains as one of the more experienced groups, its size hasn't kept pace with some larger peers. Veteran managers Penny Foley, David Robbins, and Alex Stanojevic lead the team that, while experienced, has seen a few departures over the years and lacks the depth of some of its peers. The team's process, which mixes flexibility and caution, as well as thoughtful country analysis, has served the strategy well in a variety of market conditions and over the long haul.
New to Coverage
MFS Mid Cap Value MVCAX debuted with an Analyst Rating of Silver for its cheaper share classes, while its most expensive ones got Bronze. Three managers lead this strategy and tap a deep pool of MFS analysts for support. Managers Brooks Taylor and Kevin Schmitz have been at the helm since November 2008, bringing stability and experience to the strategy. In June 2021, the team promoted Richard Offen to the management ranks. Like other MFS strategies, the managers focus on companies with durable business models, a history of strong capital stewardship, and reasonable evaluations. However, these managers allocate roughly a third of their portfolio to an opportunistic bucket, allowing them to broaden their investable universe. With the backing of its MFS' strong resources and a promising mix of quality and opportunistic stocks, this is a solid mid-value equity option.
Associate director Chris Franz contributed to this article.