The funds were previously rated B and BB respectively.

 van Eyk has also cut the rating on the Macquarie High Conviction Fund from an A to a BB. 

The moves come after the announcement that portfolio manager Neil Carter and analysts Jim Copland and Matthew Griffin have tendered their resignation to the investment firm. 

The FundWatch rating is applied when there are significant problems, disruptions or uncertainties with regard to people, process or business management at a fund. 

The departing individuals are the key people in the management of Macquarie’s small companies and microcap strategies. Mr Carter was the lead portfolio manager of both strategies while Mr Copland and Mr Griffin were responsible for the research of large and small resources companies. 

van Eyk Head of Ratings Matthew Olsen said the loss would substantially weaken the quality of Macquarie’s smallcap and microcap offerings. Mr Carter’s nimble approach to investing in smaller companies was a significant loss as was Mr Griffin’s experience in analysing smaller resources companies, given the importance of small miners in the smallcap sector. 

He noted that those analysts who would be assuming their responsibilities were also experienced, but had mainly managed large cap strategies. 

“Our concern for both strategies is further amplified by the current market conditions, which demand close attention by the portfolio manager to monitor and actively manage investment risks,” Mr Olsen said. 

The impact of the resignations on the High Conviction Fund will be less severe, Mr Olsen said. While the fund would be weakened by the loss of Mr Copland’s experience in analysing resources companies in particular, the calibre of the fund’s portfolio manager and the senior members of the investment team remained a key strength of the offering.

Mr Olsen noted that Macquarie was currently reviewing additional measures to strengthen staff retention. “We will look to assess the details of the incentive plan once it becomes available,” he said.

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 Mr Carter managed Macquarie’s Australian Small Companies Fund and Australian Microcap Fund, which we have placed ‘On Hold’. 

We have also placed ‘On Hold’ the large-cap Macquarie High Conviction Fund, given the significance of all three team members to the broader team, and the impact of their departure on the remaining team members. Macquarie has a broad-cap team structure, in which Mr Copland and Mr Griffin were responsible for researching both large- and small-cap resources companies. 

As an interim measure, Mr Carter’s funds will be overseen by senior colleagues, listed equities division head, Patrick Hodgens, and portfolio manager Mark Harrison, who is responsible for the Macquarie High Conviction Fund. As well as Mr Hodgens and Mr Harrison, the team has six additional analysts, including senior members such as head of research Andy Kovacs. 

We are monitoring developments and will reassess the ‘On Hold’ ratings when we have more clarity over the steps Macquarie will take in response to these team departures.

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