TD Recommended Funds - Upgrades and downgrades


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Artemis UK Select

Under Review Rating Upgrade to Neutral

The fund was upgraded to a Neutral Rating in May 2016. The fund was previously Under Review following the departure of previous manager Tim Steer. After new manager Ed Legget's appointment the fund was renamed from Artemis UK Growth to Artemis UK Select to reflect Legget’s investment approach, which is more value and less growth focused. Morningstar says it acknowledges Legget’s strong previous track record as manager of SLI UK Equity Unconstrained, however it is waiting to see how he adapts to working at Artemis, where there is no centralised analyst team and hence a greater focus on managers’ independent idea generation.


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Kames High Yield Bond

Silver Rating Downgrade to Neutral

The fund was downgraded to a Neutral Rating in June 2016. The fund was placed Under Review in early June following the news co-manager Claire McGuckin had left Kames. Simultaneously Kames announced David Ennett will join from Standard Life Investments in September 2016 to head the firm’s high yield team and co-manage the fund. Manager Philip Milburn is also expected to return in the third quarter after a leave of absence due to health reasons. Morningstar believes Miburn’s return and Ennett’s addition are reassuring, but needs to assess how the two work together. The current level of conviction is reflected by its Neutral rating.


Commercial property funds

Since 4 July 2016 a number of UK commercial property funds have suspended trading and others have announced measures such as revaluations. A suspension of trading means our customers cannot make any new investments or withdraw any assets until the suspension is lifted. Suspension happens in funds with non-liquid assets in times of stress in order to protect the interests of the fund’s shareholders. This should allow the fund manager time to raise cash levels in a controlled manner, ensuring any asset disposals are achieved at reasonable values. Commercial property is typically a less liquid asset class – it takes time to sell commercial property such as office blocks and warehouses.

While commercial property remains a viable investment in the long term as part of a balanced portfolio, these funds have been seeing heavy levels of selling. M&G Property Portfolio has been removed from our Recommended Funds list as a temporary measure as the fund is currently suspended. L&G UK Property and BlackRock Global Property Securities Equity Tracker remain on the list but we will monitor the situation closely. We will keep you up to date and inform you when any suspended funds reopen. If you are invested in one of the suspended funds it is important to remember that you probably weren’t planning on selling right now anyway. Property funds will continue to pay out income if you are in the income share class, regardless of whether they are closed. It is also worth noting global property funds have been less impacted and offer further diversification. The best thing to do, if you do not require access to the assets, is to sit it out and wait for markets, and property funds in particular, to return to normality. Althought these commercial property funds remain on the recommended funds list, investors need to be aware that due to liquidity constraints there could be times when they will be unable to sell.


What are Morningstar’s Gold, Silver and Bronze Ratings?

Most of the funds on our TD Recommended Funds list hold a Morningstar Analyst Rating of Gold, Silver or Bronze. These ratings indicate that the fund is likely to outperform its respective peer group according to Morningstar. Ratings are only awarded following extensive due diligence by Morningstar’s analysts which includes meeting with the fund management team, assessing the investment process, portfolio, price and performance of the fund through the whole market cycle.

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