BGF World Financials A2 |
Morningstar's Take
|18/08/2023by Jeffrey Schumacher
| BGF World Financials is run by an experienced portfolio manager, supported by a healthy level of analytical resources, who consistently executes a well-defined, distinctive, but potentially volatile strategy. The People and Process Pillar ratings are retained at Above Average. Vasco Moreno took over management of this strategy in 2015. He is a seasoned investor in the financial sector, with nearly three decades of experience in the industry. He began his career on the sell side in the United States, has worked at several specialist financials houses, and has previously managed long-short financials portfolios. Moreno demonstrates clarity of thought and deep insights in industry dynamics and articulates investment cases well. He's not afraid to express convictions in the portfolio, or to drastically change the portfolio when his top-down views and fundamental analysis justify a change of course. While key-person risk remains high, Hashim Bhattee became a dedicated analyst to the strategies managed by Moreno in September 2022, having previously worked as an analyst in BlackRock's Emerging Markets team and part of the Financials sector group. The Financials group of around 20 analysts has been a helpful resource for Moreno, though it has seen some employee turnover over the past 12 months. A well-defined approach and consistent implementation outweigh the strategy’s potential for elevated volatility. The investment approach aims to identify stocks that offer value relative to their peers, and a specific catalyst with the potential to unlock this value. Moreno combines top-down analysis with fundamental bottom-up stock research in three different research stages before constructing a high-conviction portfolio of around 30-50 individual positions. While the strategy’s fintech exposure has long been a differentiating factor, Moreno’s expectation of a change in monetary policy leading to rising interest rates prompted him to trim the fintech exposure to a historical low while increasing the portfolio’s interest-rate sensitivity through buying banks. While this played out well overall, exposure to US regional banks including Signature Bank and Silicon Valley Bank was a painful experience for investors. The fund’s volatility, high idiosyncratic risk, exposure to emerging markets, and a mid-cap tilt contribute to its elevated risk profile. While Moreno has effectively executed the strategy, the performance pattern has been erratic versus peers. The first six months of 2023 have been no exception, as the strategy recovered phenomenally in the second quarter from a beating in the first three months. Longer term, Moreno’s effective stock selection has compensated investors for the additional risk over his tenure. |
Interesting, but not for the faint-hearted.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | Above Average |
| Parent | Above Average |
| Process | Above Average |
Morningstar Medalist RatingMorningstar assigns the Medalist Rating to funds that are qualitatively and quantitatively assessed through manager research and algorithmic processes. The assessment turns on three key “pillars” – People, Process, and Parent – that yield an estimate of how well a fund will perform before fees but after adjusting for risk.
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