BGF World Energy D2 |
Morningstar's Take
|01/09/2023by Ramanand Kothari
| BGF World Energy is led by two seasoned managers who apply a sensible investment approach. However, the lead manager's involvement in other mandates and limitations imposed by UCITS rules results in an Average rating for the People and Process Pillars. Alastair Bishop and Mark Hume have been running this strategy together since March 2018, but the final decision-making lies with Bishop. Both are experienced investors with complementary skills and have established a good working relationship over the years. Bishop's managerial involvement dates back to November 2015, when he worked alongside the previous comanager, who departed in 2017. Hume, who has focused on large-cap energy stocks throughout his two-decade career, brings industry expertise that supports Bishop's long-standing knowledge of clean technology and renewable energy. The addition of Tao Ly in August 2021, who has more than a decade of experience in the energy space, is a positive development following the departure of the team's previous dedicated analyst in 2019. His involvement not only augmented the team's capabilities but also helped spread some of the workload, most notably owing to Bishop having to also focus on being lead manager on the Sustainable Energy and Future of Transport strategies. The managers have been consistent in the execution of the investment process and take a flexible approach to idea generation, combining top-down and bottom-up analysis. They look for various opportunities: long-term structural winners, relative valuation/rerating potential, and turnaround stories, which also help in diversification purposes. The strategy's prospectus benchmark changed to the MSCI World Energy 30% Buffer 10/40 Index in December 2020, replacing the MSCI World Energy 10/40 benchmark. The latter is very top-heavy, while the new index reduces the top two positions from a 10% maximum weight to 7%. Although, we think the overall composition of the portfolio will remain relatively unchanged. This structural restriction could cause relative performance outcomes outside of the managers' control. Given the constraints and benchmark concentration, the active share has been consistently low, historically about 40%, even after the index change (not uncommon for this sector). The strategy invests across the market-cap spectrum and all subsectors. This shifts in line with the team's calls on the attractiveness of different market segments, although small-cap exposure is limited given the strategy's size. While the managers aim to add value through security selection, the fund’s relative performance will often dictated by the performance of the index's benchmark heavyweights. Under the duo's tenure to end July 2023, total returns are just behind the MSCI World Energy Index but ahead of the index over the year ended July 2023. |
A reasonable proposition for global energy exposure.To find out how Morningstar rates a fund click here.
| Morningstar Pillars | |
| People | Average |
| Parent | Above Average |
| Process | 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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