Morningstar downgrades BT again
Morningstar has dropped another star off BT Fund Management’s rating, downgrading the fund manager from three to two stars.
Morningstar says the downgrade means BT is now identified as “a relatively ‘poor quality’ fund manager in Morningstar’s opinion”. This places BT amongst company of other two star managers such as Advance, BNP Paribas, County, INVESCO and National Australia.
But while the downgrade of its star rating might appear damning, Morningstar stressed that BT’s qualitative ratings “remain relatively strong” and even anticipated that the fund manager can make substantial improvement in the future, based on organisational changes it has made in the last 12 months.
Twelve months ago, Morningstar rerated BT as a four star performer. But since then, BT was stripped of a star in December when its investment performance deteriorated, culminating in the loss of key staff such as chief investment officer Andre Morony who was replaced by Gary Symons.
BT head of retail Rob Coombe has expressed little surprise about Morningstar’s downgrade, but adds that BT is none the less, disappointed in the demotion.
He says knowing that Morningstar based its assessments on performance over the past 12 months, the downgrade is not that surprising. BT’s performance numbers over the past 12 months have been some of the lowest in the industry.
But what disappoints Coombe is Morningstar’s heavy reliance upon the results of the past in determining a fund manager’s overall rating.
“We’re not surprised about the downgrade, as Morningstar’s process is fairly transparent,” Coombe says. “But we’re disappointed none the less, because we don’t believe that [Morningstar’s assessment] is indicative of the future performance of BT.”
Coombe says that other research houses focus more on the changes made to processes and personnel in the group and the impact these will have on investment performance going forward. He says that other research houses also don’t give an overall ‘manager rating’ based on the average performance of all funds in a fund manager’s suite.
“The question that has to be asked is what is a good indicator of the future performance an investment company is going to make?” he says.
Coombe believes the manager rating system of Morningstar could create confusion in the mind of the consumer, who will also have to sift through the assessments of other ratings houses which often highlight discrepancies between the various findings.
Morningstar found that at May 31, 84 per cent of BT’s funds (or 78 of the 93) were of one or two star quality in its opinion, while the corresponding market average was 40 per cent. BT had 6 per cent of its funds in the three star category, 8 per cent with four stars, and 2 per cent with five.
Recommended for you
David Sipina has been sentenced to three years under an intensive correction order for his role in the unlicensed Courtenay House financial services.
As AFSLs endeavour to meet their breach reporting obligations, a legal expert has emphasised why robust documentation will prove fruitful, particularly in the face of potential regulatory investigations.
Betashares has named the top Australian suburbs with the highest spare cash flow, shining a light on where financial advisers could eye out potential clients.
A relevant provider has received a written direction from the Financial Services and Credit Panel after a superannuation rollover resulted in tax bill of over $200,000 for a client.