CFS Aussie equities funds downgraded
Research house Standard & Poor’s (S&P) has finally finished its assessment of the new faces in charge of building most of Colonial First State’s (CFS) Australian Equities funds, and the result has been a downgrade for Australia’s biggest fund manager.
As reported early in September by Money Management, S&P placed 39 of CFS’ Australian equities funds ‘on hold’ because senior portfolio manager, Simon Hudson, left the group taking 12 years experience with him.
Now that S&P has had a face-to-face meeting with his replacements, Jim Taylor and Simon Shields, all 39 funds have been downgraded to a three-star, or ‘investment grade’ rating.
S&P fund analyst Veronica Gullo said the three-star rating is not a poor rating.
She said it means S&P expects the funds to perform in line with CFS’ stated objectives going forward, but no over performance could be expected.
Up until the funds were placed ‘on hold’, most of the Commonwealth Bank-owned fund manager’s Australian equities funds were on a S&P four-star (recommended) or on a five-star (highly recommended) rating.
Gullo said the downgrade to the three-star ratings was a result of S&P deciding to err on the side of caution given the relative inexperience of the new portfolio managers. Taylor is particularly green, having only held such a position for one year.
“While Mr Taylor’s performance over the past year in managing the Australasian fund was strong, his lack of a long-term track record as a portfolio manager has contributed to the downgrade,” Gullo said.
“The lack of experienced staff to assist Mr Shields with his portfolio and team management responsibilities contributes to S&P’s weaker conviction in the team’s ability to generate long-term above average returns versus other Australian equities managers.”
Gullo said CFS would get the chance to improve its rating in either the first or second quarter of 2006, when S&P conducts its annual sector review.
Funds affected by the downgrade include CFS’ Leaders Fund, Australian Shares Fund, Imputation Funds and Diversified Funds.
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