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Portfolio > Mutual Funds

Morningstar Upgrades 7 Funds, Downgrades 4

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Morningstar says it recently upgraded seven mutual funds and downgraded four. It gave five funds new ratings.

Upgraded funds include some managed by Janus, Neuberger Berman, AQR, CBRE Claron, LoCorr and Matthews.

The fund firms with downgrades in April are Fidelity, JPMorgan (JPM), T. Rowe Price and Western Asset Management.

New ratings have been issued for funds created by American Century, Blackstone, Fidelity, John Hancock and Prudential.


The seven mutual funds that were upgraded by Morningstar in April are:

  • AQE Multi-Strategy Alternative (ASAIX) – to Bronze from Neutral
  • CBRE Clarion Long/Short Institutional (CLSIX) – to Bronze from Neutral
  • Janus Triton (JANIX) – to Bronze from Neutral
  • Janus Venture (JANVX) – to Bronze from Neutral
  • LoCorr Managed Futures Strategy (LFMAX) – to Neutral from Negative
  • Matthews China Dividend Investor (MCDFX) – to Bronze from Neutral
  • Neuberger Berman International Equity Institutional (MCDFX) – to Silver from Bronze

According to senior analyst Katie Rushkewicz Reichart, CFA, both Janus Triton and Janus Venture have been run by Jonathan Coleman since May 2013. The small-growth funds have posted “impressive risk-adjusted results relative to peers and benchmarks.”

Though three years is a relatively short period of time for a fund, Coleman also has had “a good record at former mid-growth charge Janus Enterprise (JAENX),” she says.

The two funds that were recently upgraded by Morningstar “have held up well in bouts of market volatility in 2015 and 2016.”

Both funds, however, were closed to new investors in May 2015; they have low fees, Reichart adds.

Neuberger Berman International Equity has a good long-term record, according to Morningstar, and “performed particularly well during volatile periods in 2014 and 2015 even though it tilts toward growth and mid-cap stocks and is typically fully invested.”

The fund is led by Benjamin Segal and has a stable analyst team, Reichart points out. “Reasonable fees and a willingness to close the fund before it gets too big are other merits supporting the upgrade,” she explained.


The four mutual funds recently  downgraded by Morningstar are:

  • Fidelity Capital Appreciation (FDCAX) downgraded to Neutral from Bronze
  • JPMorgan Core Bond Select (WOBDX) downgraded to Bronze from Silver
  • T. Rowe Price Small-Cap Stock (OTCFX) downgraded to Neutral from Silver
  • Western Asset High Yield (WAHYX) – downgraded to Neutral from Bronze

T. Rowe Price recently said longtime fund manager Greg McCrickard was stepping down in October.

According to Morningstar, his successor is Frank Alonso, who has served as associate portfolio manager since 2013.

“That role gives him familiarity with the fund’s holdings, and he’ll benefit from a six-month transition period. He’s successfully run a small/mid-cap strategy available to investors outside the United States, though his record there is under three years,” explained Reichart. In the case of the small-cap stock fund, Alonso will be taking on significantly more assets ($10 billion). While he doesn’t anticipate making major changes to the fund’s process, Morningstar remains cautions: “… Until we see how he navigates, the rating is Neutral.”

Commenting on the capital appreciation fund, the fund analyst says that while veteran Fidelity fund manager Fergus Shiel has “a decent record since his 2005 start … his process is vague, turnover is high, and risk-adjusted returns aren’t great, prompting the downgrade.”

Morningstar downgraded JPMorgan’s bond fund due to a “slew of changes to a historically stable team.”

The research group says that the fund’s lead manager, Barb Miller, took the helm in late 2015, when longtime manager Doug Swanson decided to take a leave of absence.

“There were other departures in 2016 affecting this fund and the broader team,” Reichart said. “While Miller brings much experience to the role and hasn’t made significant changes to the strategy, the team turnover warranted a downgrade.”

New Ratings

The five mutual funds that recieved new ratings by Morningstar in April are:

  • American Century One Choice 2060 (ARGMX) – Bronze
  • Blackstone Alternative Multi-Strategy (BXMIX) – Neutral
  • Fidelity International Growth (FIGFX) – Bronze
  • John Hancock Strategic Income Opportunities NAV (JHSEX) – Silver
  • Prudential Absolute Return Bond (PADAX) – Neutral

Morningstar reports that the Fidelity International Growth is a no-load version of a similar fund; it has under $2 billion in assets, but manager Jed Weiss is in charge of around $14 billion in the strategy overall, when assets from Fidelity’s target-date series are included.

“His focus on multiyear structural growth stories has coincided with the fund’s relatively low turnover and a tame risk profile, and results since his 2007 start have been strong,” said Reichart.

The John Hancock Strategic Income Opportunities is a $5.7 billion fund. Its managerial team has “successfully executed a sector-rotation strategy since its 2006 inception, resulting in strong performance relative to its multi-sector-bond peers,” Morningstar reports.

— Check out Low Mutual Fund Fees Predict Higher Returns: Morningstar on ThinkAdvisor.


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