Morningstar has moved the Templeton Emerging Markets investment trust from under review to neutral following a number of changes at the fund once run by veteran fund manager Mark Mobius.
But Morningstar says the pace of recent changes, including a new management structure and investment process, means the trust does not merit a positive rating.
The trust is now managed on a day-to-day basis by Carlos Hardenberg and Chetan Seghal, with Mobius regularly reviewing the portfolio.
Morningstar UK director of manager research Jeremy Beckwith says the trust will now have a greater focus on risk management.
The team is being split between portfolio managers and analysts, compared with the previous structure where everyone had analyst responsibilities.
The research team is also being split between those working for global emerging market mandates and those working for regional and country mandates.
Beckwith says Hardenberg and Seghal are “experienced investors” but not with a large-cap global emerging markets fund.
He says: “With a restructuring of the relationship between analyst and portfolio managers as well, there is too much change occurring on this fund to warrant a positive rating.”
Beckwith says on the investment process side, the portfolio will now run 80 to 100 positions and be much “more conscious” of sector and country deviations from its benchmark.
Previously, the trust had about 50 stock positions, selected bottom-up, with a strong value bias, and with very little consideration of country or sector weightings.
Beckwith also says there will be a switch in analytical focus from a clear value orientation to one where earnings sustainability is paramount.
A Franklin Templeton spokeswoman says: “While we are constantly refining our research efforts, our investment process remains a value-oriented, bottom-up investment approach with the aim to deliver strong long-term performance.”
Lipper UK research head Jake Moeller says there are “better offerings” in this space and that the structural changes to the trust are “material enough to prove a distraction to the investment management process”.
He says: “I’m not sure the transition has been articulated well and Mobius staying on board may prevent the new team from imprinting their style on the fund. The changes need to be bedded down. I would revisit in six months.”
Mobius stepped down from the Templeton Emerging Markets investment trust in July . He remains executive chairman of Templeton Emerging Markets Group.