Standard & Poor’s Fund Services has moved its ratings for the Macquarie Australian Small Companies Fund and the Macquarie Australian Microcaps Fund from ‘On Hold’ to ‘Sell’.
This follows the departure from Macquarie Funds Group of Neil Carter, who managed both funds, and analysts Jim Copland and Matt Griffin, who as resources analysts had a high degree of input into both funds.
Our initial ‘ On Hold’ rating was put in place to enable us to determine exactly how Macquarie would respond to the departures, and how it would manage the small-cap and micro-cap funds both in the short and long term.
In the short term, both funds will be managed by head of equities, Patrick Hodgens, with assistance from Vidya Krishnakumar, a member of Macquarie’s domestic quantitative team, and James Dougherty, investment specialist. This arrangement will be in place until a long-term solution is found.
“We believe that this interim arrangement is less than optimal. The interim portfolio managers are far less familiar than the departing team members with the portfolios of both funds, which are significantly exposed to small resources companies,” said Tom Mills, S&P Funds Services analyst. “We believe that this arrangement risks handicapping the funds, at least in the short term, particularly relative to peers in the competitive small- and micro-cap Australian equities market”, said Mr Mills.
“In the absence of a definitive plan for the longer-term management of the small and microcap funds, we believe that the level of uncertainty is such that investors should consider obtaining advice on switching or redeeming funds. This partly reflects the availability of high quality, alternative managers in this asset class offering greater continuity of management,” added Mr Mills.
The Macquarie High Conviction Fund (HCF), which continues to be managed by Mark Harrison, remains ‘On Hold’ and is currently under review. While the HCF is a separate case to the small- and micro-cap funds, we placed it ‘On Hold’ to fully assess the impact of the departures on the broader team.
