Morningstar avoids CFS global property

Following the defection of Colonial First State’s (CFS) global listed property team to Perennial, Morningstar has downgraded the CFS global property strategy to its lowest rating, ‘avoid’.

To date, the CFS global property strategy had been based upon the team’s ability to select stocks that represented the best value on a global basis without taking location into account.

This approach delivered good returns but meant the strategy sometimes acquired shares that the majority of property funds would not hold.

The research house cites CFS’s holding in American Tower Corporation as a prime example of this phenomenon, a stock that was one of the strategy’s best performers in 2005.

As reported in Money Management, unfortunately for the fund manager the entire team of six that was responsible for the past success and machinations of the strategy are no longer working at CFS. Furthermore, CFS is yet to find any candidates to replace them. Former head of property securities at BT Antoinette Plater has been placed in charge of the strategy in the interim.

Morningstar stated: “The future of this strategy looks uncertain now that the team responsible for this strategy’s track record has left.”

The research house assessed: “It’s best to stay away here, particularly given the portfolio’s large stock positions, which are being left uncovered.”

The walk-out by the global listed property team follows CFS Global Asset Management’s restructure in October 2005, which brought the firm’s direct property, infrastructure and private equity businesses under one roof.

This week’s loss of the entire property securities team has also attracted ‘hold’ and ‘fund watch’ ratings from research houses Lonsec and Standard & Poor’s (S&P).

In further ratings developments, S&P has upgraded Challenger’s Australian Share Fund to four stars. S&P decided to improve the rating due to the strength and stability of the fund’s investment team and the way the fund achieved a seamless transition from former manager Pano Raftopoulos to current manager Peter Greentree.