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Morningstar upgrades ART, Perpetual funds

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Australian Retirement Trust and Perpetual are the only firms to receive upgrades.

Following the completion of its latest multisector reviews, Morningstar has upgraded its Morningstar Medalist Rating for six share classes across five strategies offered by Australian Retirement Trust (ART) and Perpetual.

The research house conducted assessments on a total of 532 multisector share classes across 217 strategies during the latest review cycle. The Morningstar Medalist Rating reflects the firm’s conviction in the investment team, investment process, and parent entity.

ART received upgrades for four of its Super Savings investment options Growth, Balanced, Retirement, and Conservative which all moved from bronze to silver.


Morningstar said that ART’s multisector strategies are underpinned by “a solid investment process and high-calibre team producing sound return outcomes for its members”.

“Chief investment officer Ian Patrick is capable and supported by a senior investment team in a collegiate culture. The overall investments team is well-resourced for the investment process applied,” the research house said.

According to Morningstar, ART’s growth ambitions to reach $500 billion in assets under management by the end of the decade are “not unrealistic”.

“Merger integration work continues, and key milestones left to achieve include the custody transition. The extent of the merger benefits is still to be fully realised and remains an incremental, multiyear process,” the firm continued.

“Merging two large investment teams was an ambitious undertaking, and we have gained confidence in the achievements so far. The teams are culturally integrated and supported under Patrick’s inclusive leadership style.

“They have a strong drive to continue leveraging their strategic partnerships, and they continue to show astuteness in the quality of their manager line-up. The investment process is well-designed and pragmatically applied to achieve the options’ return objectives.”

Morningstar identified key watch points as being the pending asset integration of legacy Sunsuper and QSuper assets and capacity management within Australian equities.

Risk management within ART’s investment process was assessed as being “solid”, with the fund’s approach to asset valuations appearing “prudent and rigorous”. Meanwhile, the firm suggested that ART’s investment fees could be set to gradually reduce over time.

“Overall, ART is costlier than some rivals, but its net performance outcomes have been rewarding for members,” Morningstar said.

“We think, in the context of the points above, ART has a strong investment team with an established investment process, raising our conviction in its multi-asset offering.”

In response, Mr Patrick said the updated ratings recognise ART’s continued focus on delivering retirement outcomes to its members in line with investment objectives.

“Australian Retirement Trust is a fund that works for its more than 2.3 million members to deliver strong returns to enable a more confident retirement. Our promotion from bronze to silver in multiple investment options recognises how the fund continues to use our scale and expertise to do just that,” he said.

“It’s not every day you get promoted, so we’re very proud to have been acknowledged in this way. It’s a reflection of the hard work and dedication of the whole team and truly a testament to the world-class investment capability of Australian Retirement Trust’s investment team.”

Morningstar’s two other upgrades are given to the Perpetual Diversified Real Return W (standard fee option) and Perpetual Diversified Real Return Z (performance fee option).

The firm said the Perpetual Diversified Real Return Fund offers a “best-in-class investment process run by an experienced and tenured team with diverse skill sets”.

“Head of multi-asset Michael O’Dea leads one of the most experienced and multifaceted groups in the sector. While O’Dea is the ultimate decisionmaker, he is astute in harnessing the individual specialties in asset allocation, macroeconomics, and implementation of investment ideas,” Morningstar said.

“This breadth of complementary skill sets clearly augments the strategy’s risk-management focus. And quantitative capabilities face continued innovations, such as a toolset to assess cross-asset risks and hedging efficacy and expansion of signals. These have led to a robust qualitative framework formed from many years of managing portfolios over market cycles.”

According to Morningstar, Perpetual’s process excels in utilising implementation methods to skew risk and reward, notably in the fund manager’s approach to hedging.

“Protection is generally in place to limit the impact of heightened volatility; smartly, these positions are adjusted between varying exposures to ensure cost efficiency and bias the return for risk to the upside.

“This competitive edge has continued to deliver exceptional downside protection from market sell-offs, exemplified in 2022. But the team also isn’t afraid to take risks to generate strong absolute returns when appropriate, as risk-adjusted returns relative to the category benchmark attest to, despite Perpetual’s value style being out of vogue for a period.

In conclusion, Morningstar said that Perpetual’s “innovative approach to asset allocation managed by a standout team holds true to its label”.

Morningstar upgrades ART, Perpetual funds

Australian Retirement Trust and Perpetual are the only firms to receive upgrades.

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Jon Bragg

Jon Bragg

Jon Bragg is a journalist for Momentum Media's Investor Daily, nestegg and ifa. He enjoys writing about a wide variety of financial topics and issues and exploring the many implications they have on all aspects of life.

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