Revolving doors fuel tentative ratings

The turnover of Australian funds management investment personnel is the underlying reason only two funds out of an initial 21 reviewed by international ratings and investment data group,Standard & Poor’s(S&P), received a AAA rating.

S&P’s associate director investment services Greg Barr says the two funds meriting the top AAA rating - theColonial First StateEmerging Markets Fund and theAXAGlobal Equity Technology Fund - had exhibited stability in terms of their portfolio managers and the analytics team.

“Obviously, the bar with respect to a triple A rating is set pretty high and the fact that only two funds gained the rating reflects the relative instability at the portfolio management level,” he says.

Barr says that in assigning ratings, S&P looks at the stability of the portfolio managers and the analytics team, consistent with S&P’s view of funds that adhere to disciplined processes and exhibit strong management are more likely over the long run to provide consistent, above-average volatility-adjusted returns.

Of the two funds gaining the coveted triple A rating, the Colonial First State Emerging Markets Fund also warranted a ‘New’ designation which Barr said reflected the fact that while it was new to Australia it had been well-established overseas for a number of years.

Two other funds warranted ‘New’ designations, albeit with only A ratings - theAberdeenAustralian Equity Fund and theLazardSelect Australian Equity Fund.

Barr said the Aberdeen Australian Equity Fund was given a ‘New’ designation because, while it had been running for a number of years, there had been some recent changes to process.

He said the ‘New’ designation for the Lazard Select Equity Fund reflected the fact that it was less than three years’ old.