Our “Crow’s Nest” Prospect List Has Been Updated

Ollie Smith: The Morningstar Prospect List is an important bellwether for great funds. Here to tell us more is Jeffrey Schumacher, Morningstar’s director of manager research for EMEA.

Jeffrey, you recently launched the Morningstar Prospects EMEA and Asia Report. Can you tell us a little bit more about what it’s about?

Jeffrey Schumacher: Definitely. So, the Morningstar Prospect List is a semiannual listing of promising actively-managed strategies we believe are worth greater investor attention, but that are not yet covered by Morningstar’s Manager Research team. So, our Europe and Asia-based analysts cover approximately 1,200 actively and passively managed strategies, which all carry a Morningstar Analyst Rating. But on top of that, we are continuously monitoring the wider fund universe in order to identify strategies we believe have merit, and which we may ultimately add to our coverage list. The prospect list essentially presents the funds that we currently have on our radar.

YOU: And how many are on it at the moment?

JS: In this 10th edition of the Prospect List we present a list of 35 strategies that we think have merit and are worth investors’ consideration. Since our last update, we have removed seven strategies. Having closely monitored them, we concluded – for some of them at least – that they don’t have enough merit to be considered for full coverage. However, we have also graduated one strategy from the Prospect List, and we also plan to initiate coverage on another four in the first half of 2022.

YOU: One of the funds promoted from the Prospect List was BNY Mellon’s Sustainable Real Return Fund, wasn’t it? Can you tell us a little bit more about that fund specifically?

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JS: This strategy is basically the sustainable version of the flagship fund BNY Mellon Global Real Return. It targets a gross annual return of 4% above cash and is also managed by Newton’s Real Return team. So, the process is underpinned by Newton’s distinctive thematic approach, but it has been adapted to suit the absolute return, capital protection and sustainability objectives of the strategy. So, in short, we think this is a sound choice for investors seeking a competitive dynamic allocation strategy that aims to preserve capital, but also applying an ESG focus. Both the people and process pillars earn an above average rating, which leads to Morningstar Analyst Ratings of Bronze and Silver across the share classes depending on the fee levels.

YOU: Sure. And as for the future, which funds do you plan to initiate coverage on in the coming months?

JS: There are two funds we will initiate coverage on: Berenberg European Focus and Berenberg Eurozone Focus. They were launched in October 2017 and rely on the same sensible quality growth approach that lead manager Matthias Born already applied previously when working at Allianz Global Investors, where he was responsible for managing the European and Eurozone Growth strategies. So, over there, he has already generated strong results being a co-manager there from October 29 until September 2017.

At Berenberg though, the portfolio shows a stronger and more pronounced growth tilt, and he also invests across the market cap spectrum, which means that there can be a sizable allocation to small cap stocks, which currently stands at around 20% of assets. The portfolios are also slightly more concentrated here, allowing the manager and his team to clearly express their convictions.

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YOU: Sure. And what are some of the funds that have recently been added to the prospect list itself?

JS: yeah. So, this time, we have added two strategies to the prospect list and one of them is Loomis Sayles Euro High Yield. This strategy is managed by an experienced team of euro credit investors led by Rik den Hartog and Pim van Mourik Broekman. The team previously managed the Gold-rated Kempen Euro Credit strategy and also the Kempen Euro High yield Fund before leaving the firm to join Loomis Sayles in October 2020. We still believe the team’s core strengths and the investment process they have previously applied remain intact at this strategy, which was launched in early 2021. With that, it makes it an interesting strategy for investors to monitor.

YOU: Jeffrey, thanks so much for your time. For more on all things fund performance, visit Morningstar.co.uk. Until next time, I’ve been Ollie Smith.


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George Holan

George Holan is chief editor at Plainsmen Post and has articles published in many notable publications in the last decade.

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