Morningstar drops coverage of UBS underperformer

Share on facebook
Share on twitter
Share on linkedin
Share on email

Morningstar has announced that it will stop covering the UBS Australian Share Fund, saying the $700 million fund “lacks investment merit”.

In an analyst note issued yesterday, Morningstar says: “We no longer believe the strategy is an acceptable choice for investors.

“During the past decade, the asset class of Australian equities has become extremely competitive, with highly impressive teams and processes, while UBS Australian Share has failed to keep pace.”

At the heart of the fund’s problem is a heavy emphasis on a stock valuation process that has often resulted in a contrarian portfolio heavy in defensive stocks, which have solid valuations but minimal earnings growth, Morningstar says.

“Commodities exposure has largely been too specifically focused and often mistimed,” It says.

Results have been inconsistent, with the fund underperforming the S&P/ASX 200 Index in four of the six years to the end of 2017.

The fund has been bottom quartile in three of the past five years. Its average total return over the past five years has been 5.1 per cent a year, compared with a return of 7.5 per cent for the index over the same period.

The fund has a high conviction, concentrated portfolio of about 30 stocks, with the top 10 stocks making up around two-thirds of the portfolio. In recent times some of those stocks have included Telstra, Westpac and Tabcorp.

The investment team is led by head of Australian equities Jakov Males and head of research Marissa Rossi.

 

Share on facebook
Share on twitter
Share on linkedin
Share on email