ii makes first changes to Super 60 rated list since launch

We explain recent changes to our Super 60 list of rated funds and the decisions made since launch.

• Artemis Global Income is removed after formal review
• Morgan Stanley UK Global Brands Equity Income is added as a Global Equity Income option
• Murray International (LSE:MYI) is recategorised as an Adventurous option 
• BlackRock Frontiers investment trust (LSE:BRFI) placed under formal review following an extended period of unsatisfactory performance

Over a year and a half since launching the Super 60 rated list, interactive investor, the UK’s second largest direct to consumer investment platform, has made its first changes to the line-up, with value investing coming under scrutiny.

Artemis Global Income, which has a value investing strategy where managers look for undervalued assets, has been removed after an extended period of underperformance. 

Morgan Stanley Global Brands Equity Income, which takes a quality balanced approach in delivering income – but not at the expense of capital growth – has been added.

Whilst interactive investor maintains its conviction in Murray International, which also has a value focus, it has been reclassified as ‘Adventurous’ following a period in which value investing has offered no additional protection compared to growth investing, despite the March market sell off.

Cheap stocks have simply become cheaper, and certainly this has impacted the relative performance of Murray International compared with other global equity income funds. Investors may need to be patient, but the attractive yield and progressive dividend profile will help here. 

Artemis Global Income

On the removal of Artemis Global Income, Dzmitry Lipski, Head of Fund Research, interactive investor, says:

“This decision has been made in-line with our stated methodology and after conducting a formal in-depth review of the fund. That included sector and peer group analysis as well as meeting the manager and the team. The manager’s investment style has contributed to the fund’s comparatively disappointing performance against peers, but more recently this has also been compounded by some poor stock selection decisions.”

Murray International Trust

On the reclassification of Murray International, Dzmitry Lipski, Head of Fund Research, interactive investor, says: “The decision to reclassify Murray International from Global Equity Income/ Income to Global Equity Income/ Adventurous is in-line with our stated methodology. We have conducted a careful review of the risks associated with the trust, including the style of the manager and portfolio positioning as well as assessment of the sector. 

“In conclusion, we maintain our conviction in the manager and his process. The risk re-categorisation was needed due to the current, post sell-off market environment and the possibility of longer recovery periods for value investing.”  

Selection rationale for Morgan Stanley Global Brands Equity Income Fund

On the new inclusion of Morgan Stanley Global Brands Equity Income Fund, Dzmitry Lipski, Head of Fund Research, interactive investor, says:

“This is the first new addition since the launch of the Super 60. In-line with our stated methodology, we have conducted rigorous quantitative analysis on the fund and met the investment team before making our final decision. The fund, which is featured as the ‘Income’ option in the Global Equity Income category, showed exceptional qualities in terms of investment process, performance and capital protection, income generation, strength of the team, transparency, and value for money. All this helped us to build conviction in the fund during our due diligence process.

“Morgan Stanley Global Brands Equity Income Fund is run by the highly experienced and well-resourced International Equity team at Morgan Stanley. It seeks to provide investors with an attractive yield of around 4% per annum alongside long-term capital growth and performance has also been relatively resilient during the recent market downturn.

“The team takes a high-conviction approach and runs a highly concentrated portfolio of around 20-40 holdings.   The income the fund generates comes in two forms. The underlying companies in the portfolio have an average dividend yield of around 2%. The fund’s income is boosted to 4% by a derivatives-based strategy for which the fund receives regular premiums. 

“The investment process is well-defined and a stock needs to tick a number of boxes before being considered for inclusion. These include durability of the franchise, sustainable returns on capital, and strong revenue streams.

“The fund is not constrained by an index benchmark and does not take bets on regions or market sectors. The investment process is purely based on individual stock merits. The result is a strong long-term track record of generating income and delivering returns in excess of both the MSCI World index benchmark and the Investment Association’s Global Equity Income sector average. The strategy has generated better risk-adjusted returns and lower volatility than its peer group.  

“This fund could be suitable for investors seeking a higher income than that supplied by core equity funds, while at the same time looking for a good balance between income and capital appreciation. It could also provide diversification benefits beyond traditional income maximising strategies, which tend to find opportunities in more cyclical and economically sensitive areas of the market such as Financials and Energy.”

BlackRock Frontiers Investment Trust under Formal Review

On BlackRock Frontiers Investment Trust being placed under formal review, Dzmitry Lipski says: 

“The BlackRock Frontiers Investment Trust is included in the ii Super 60 list of rated funds as an Adventurous option within the Emerging Markets category. In line with our stated methodology, the investment selection committee decided to put BlackRock Frontiers Investment Trust under formal review on 21st July 2020 following an extended period of unsatisfactory performance. Our in-depth review process will consider the various factors that contributed to the disappointing results, and will include a review of the team and the fund manager investment process.”