Morningstar's manager research analysts added six new funds to the coverage list late last year and in January 2016. Also, we re-evaluated another fund already under coverage following a manager departure. Below, we roundup the latest batch of Analyst Ratings updates.
New Ratings
PH&N Vintage (Silver)
This offering shares the same management team and a similar process as Bronze-rated PH&N Canadian Equity, but its more distinctive portfolio earns it a Silver rating. Doug Stadelman and Scott Lysakowski, finalists for the 2016 Morningstar Domestic-Equity Fund Manager of the Year award, stand out for meticulous bottom-up research and disciplined execution. Where they excel most is in artful portfolio construction. The managers rely on their "playbook"--their guide to investing in stocks or sectors based on the economic environment--and valuation relative to a company's growth rate for position sizing. Lead manager Stadelman has only been on board since 2009. Poor performance in prior years still casts a pall on the fund's long-term record.
Manulife Global Real Estate Unconstrained (Neutral)
Subadvisor Standard Life has a long tradition of investing directly in real estate on behalf of institutional clients, but its foray into real estate stocks is more recent. The firm's heritage benefits managers Svitlana Gubriy and Bill Pekowitz, who can draw upon top-down insights developed by Standard Life's direct real estate team. Unfortunately, the managers haven't been able to translate this potential advantage into winning stock picks. The fund's record is brief but poor: Since its November 2013 launch through December 2016, it lagged its benchmark FTSE EPRA/NAREIT Developed Index by 4.9 percentage points.
Sun Life MFS International Growth (Bronze)
Managed by subavisor (and Sun Life subsidiary) MFS, this offering benefits from a veteran crew of managers and strong analyst research. The fund's valuation-conscious approach to growth investing is time tested and has led to fine long-term results at its U.S.-domiciled counterpart MFS International Growth, which is also rated Bronze. This offering, launched in 2010, has lagged its sibling because it's more expensive. Even so, it remains a solid choice relative to its category peers.
Sun Life MFS U.S. Value (Silver)
The U.S. Equity category has few actively managed funds with benchmark-beating results. This offering, also led by subadvisor MFS, stands better odds. Like its internationally focused sibling, it profits from seasoned managers. Management prioritizes investment quality and moderate valuations over distressed businesses selling at fire-sale prices. This approach has helped U.S.-domiciled MFS Value (which this fund replicates) deliver fine long-term returns with less volatility than its value counterparts. Higher costs mean this fund won't deliver similarly strong returns in absolute terms, but its strengths should keep it ahead of its weak peer group.
CIBC Global Bond (Bronze)
Renaissance Global Bond (Bronze)
These funds, subadvised by Brandywine Global Investment Management, provide benchmark-agnostic exposure to global bonds. Managers Stephen Smith and David Hoffman mostly favour government bonds with high real yields and strong or improving fundamentals. This puts their portfolios at odds with market benchmarks that give the most-indebted countries the highest ratings. The managers will move into corporate and securitized bonds when opportunity strikes and will make meaningful adjustments to duration based on their interest-rate outlook. This approach can contribute to relatively high volatility, but it has generated strong risk-adjusted returns. High costs are a negative, though, limiting our ratings to Bronze.
Reassigned from Under Review
Capital Group Global Equity (Gold)
Galen Hoskin, one of this fund's three portfolio managers, started an extended personal leave in December 2016. Leo Hee, who has been with the firm for 11 of his 22 years of investment experience, is Hoskin's successor. Capital Group employs a unique multimanager approach, splitting the portfolio into independently managed sleeves. After meeting with the firm, we concluded Hee's focus on higher-quality firms complements existing manager Dina Perry's contrarian approach and Carl Kawaja's growth orientation. He isn't as experienced as Perry and Kawaja, but he's no newbie. Capital Group's longstanding success in cultivating capable managers and packaging them together in a single fund also inspires confidence. Strong management, a solid process, an investor-focused investment culture and low fees earn this fund a Gold rating.
In addition to the above changes, we have made updates to the Analyst Reports on the following funds, for which our Analyst Rating did not change:
| CI Cambridge Canadian Equity | Bronze | |
| Fidelity Canadian Disciplined Equity | Bronze | |
| Fidelity True North | Bronze | |
| Westwood Emerging Markets | Bronze | |
| AGF Emerging Markets | Neutral |
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