BGF Sustainable Global Dynamic’s Morningstar Medalist Rating is Under Review following the upcoming retirement of David Clayton, comanager of the fund since 2017. The following text was published on May 26, 2023.
BGF Global Dynamic Equity benefits from a flexible and broadly diversified approach, supporting an Above Average Process rating, but its managers changed a few years ago and have yet to prove themselves, keeping the People rating at Average, and the Morningstar Analyst Rating at Neutral across most share classes, except for the cheapest I2 share class, which is rated Bronze.
The strategy is run out of BlackRock’s Global Allocation team as a carve-out of its flagship Global Allocation strategy. The portfolio management team appears to be settling in following several changes in 2017 and 2019-20, and team turnover has stabilised. Dan Chamby, a named comanager since 2011, retired in March 2020. Chamby had been the longest-tenured manager here since the retirement in August 2017 of Dennis Stattman, the strategy's co-founder and comanager since 2006. Chamby provided a paramount level of continuity, so his retirement is a significant loss for investors. In addition, of three comanagers named in January 2016, Kent Hogshire departed the firm in 2019; David Clayton and Russ Koesterich remain in place. In April 2019, BlackRock also appointed Rick Rieder, who heads a strong fixed-income group running several highly rated strategies, to lead the Global Allocation team. The process has been fine-tuned to bolster the impact of stock selection and give more weight to the team’s higher-conviction ideas. That said, the high level of diversification that has characterised the strategy for many years stays intact. The macro overlay has been strengthened under Rieder's leadership. Driven by macro considerations, security selection now places greater emphasis on cash flow growth and balance-sheet strength, while the previous approach was more valuation-driven. The fund exhibits a slight growth tilt, but overall factor tilts are less pronounced than they were before the process changes. This should help the strategy outperform under a wider range of market conditions than in the past when it has tended to lag in strongly rising growth-driven markets. In 2020’s growth-led market, it outperformed peers and the index by a large margin, but performance was less impressive in 2021, partly owing to market conditions that were unfavourable to growth stocks. These also were a headwind in 2022, although the strategy benefited from overweighting energy names. Hence, early results are mixed since Rieder took over the Global Allocation team, and we note that risk has been above average. The team must prove itself as it continues executing the refined approach. |
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