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S&P Assigns ‘STRONG’ Rating To Commonwealth Bank’s Vantage+ Product

Tue, 28 Jun 2011 00:37:22 +0000

Standard & Poor’s Fund Services has assigned its ‘STRONG’ rating to the Commonwealth Bank Vantage+ product. This reflects what we view as a solid expected risk-return profile, simple and efficient structure, and clear product philosophy and targeted investor profile.

Commonwealth Bank Vantage+ provides enhanced or leveraged exposure to the price returns performance of the S&P/ASX 200 index over a five-year period. Investors have 5.3 times leveraged exposure to the index capped at an 80% index gain (equating to a maximum return of 323% over the five-year term).

S&P Fund Services analyst Rodney Lay said: “Based on our back-tested and Monte Carlo analysis, we believe the expected return profile adequately compensates investors. Historical back-testing generated average returns of 15.5% p.a. A loss was recorded on 24% of occasions. The Monte Carlo analysis we undertook generated similar results, albeit with a very slightly higher probability of loss.”

“In terms of suitability, we believe investors should have a solid outlook for domestic equities as well as be prepared to incur a significant loss on invested capital. Due to the product’s very high risk-return profile, an investor’s investment amount is totally at risk, so it is suitable for only a small percentage of an overall portfolio. This is a product where a very small part of an overall portfolio can provide five times the exposure to the equities market,” added Mr. Lay.

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S&P Assigns Ratings To Various Sibling Funds For BT Platforms

Thu, 23 Jun 2011 02:56:55 +0000

Standard & Poor’s Fund Services today assigned ratings to various sibling funds managed by a range of fund managers.

These sibling funds relate to headline funds available on BT platforms where Westpac Financial Services Ltd. is the responsible entity.

We define a sibling fund as a fund that invests in an underlying pool or fund that we rate, or a separate pool or mandate that is managed in exactly the same way by the same investment team as the main capability or “headline” fund.

Based on our criteria, the funds listed below are eligible to be considered siblings and inherit the ratings on the relevant headline fund. We already rate all the headline funds listed below and their ratings are unaffected by today’s release of ratings on the sibling funds associated with them.

The funds affected by this announcement are: (headline fund in bold)

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S&P: Three-Star ‘NEW’ Rating Hunter Hall Global Ethical Trust Hedged Fund

Wed, 01 Jun 2011 04:20:07 +0000

Standard & Poor’s Fund Services today assigned its three-star ‘NEW’ rating to the Hunter Hall Global Ethical Trust Hedged Fund. This is a new product offered by Hunter Hall Investment Management that provides investors with direct hedged exposure to the Hunter Hall Ethical Trust, also rated three stars.

Hunter Hall is a boutique manager with a fundamental bottom-up, benchmark-unaware, value approach.

“After a period of internally led change, the Hunter Hall investment team has remained stable with no departures in the past two years. Pleasingly, the senior members of the firm are highly experienced and have managed money together for a considerable amount of time,” said S&P Fund Services analyst Anthony Karaminas.

“While the general structure of Hunter Hall’s investment process has remained stable, the manager has implemented a number of changes to make it more disciplined. On the whole, we view the changes positively, although we note that there have been a large number of enhancements over the past couple of years and we are keen to observe their continued positive effects,” said Mr. Karaminas.

Established on 28 February 2011, the Hunter Hall Global Ethical Trust – Hedged (GEH) is principally invested in an ethically screened global portfolio of manufacturing, service and distribution businesses. The objective of the GEH is to increase the wealth of its investors by substantially outperforming global stockmarkets, benchmarked by the MSCI World Total Return Index, Net Dividends Reinvested, Hedged into Australian Dollars (MSCI World Hedged), over the medium to long term without incurring significant risk to capital.

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Australian Mortgage Funds Continue To Suffer Redemption Pressure

Mon, 23 May 2011 02:31:06 +0000

Funds in Standard & Poor’s Fund Services’ Australian Fixed Interest – Mortgages rated peer group have all continued to deliver monthly income distributions and capital stability, but most are experiencing redemption pressure and a lack of positive net fund flows, according to the Sector Report published today.

Mortgage fund managers have not had uniform approaches or uniform timing to implementing permanent, more sustainable redemption structures.

“The status of the sector is only slightly more positive than that at the time of our last review. Managers of liquidity constrained funds continue to face significant difficulties in balancing the competing interests of investors. They need to accommodate those who want their capital returned, while also delivering an appropriate return to others who wish to remain invested,” said S&P Fund Services analyst Peter Ward.

Key findings of the report include:

The ability to improve performance is inexorably linked to a fund’s capacity to lend in a less competitive environment than before the GFC, on more conservative terms, and at higher margins. Of the nine funds we rated, five are undertaking new lending. If a fund cannot lend, its ability to re-price its portfolio is significantly restricted. Those funds that have been lending have outperformed to a greater extent than those funds unable to undertake new lending.
Portfolio credit quality has again been patchy. Some funds have seen an improvement in portfolio credit quality, although others have reported deterioration.
This sector review includes six conventional mortgage fund products, two hybrid funds, and one high-yield mortgage fund. In our review, we resolved two ‘On Hold’ ratings, but three managers withdrew their funds from the rating process, resulting in a smaller rated peer group.

The Australian Fixed Interest – Mortgages Sector Report published today covers nine capabilities offered by eight managers. This report, together with reports for all funds rated as part of the review, are available on S&P’s subscriber website www.fundsinsights.com

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AMP welcomes Standard & Poor’s rating upgrade

Mon, 16 May 2011 23:36:11 +0000

AMP Limited has welcomed the upgrade of The National Mutual Life Association of Australasia Limited’s (National Mutual Life) rating from A+ to AA- by Standard & Poor’s (S&P). National Mutual Life is AXA Asia Pacific Holding’s Australian and New Zealand life insurance company.

The upgrade brings the life insurer in line with AMP Life Limited’s AA- rating.

AMP Limited merged with AXA Asia Pacific’s Australian and New Zealand businesses on 30 March 2011.

AMP Limited’s Chief Financial Officer Paul Leaming welcomed S&P’s decision saying it reflected the stronger market position of the merged business.
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“The upgrade reflects the merged group’s leadership position in wealth management, the complementary fit of the AMP and AXA businesses and the funding mix for the merger, which is consistent with both AMP and AXA’s prudent approach to capital management,” Mr Leaming said.

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Managers Take Different Approaches To Address Mortgage Fund Liquidity With Mixed Outcomes, says S&P

Sat, 14 May 2011 04:46:06 +0000

Standard & Poor’s Fund Services’ rated nine mortgage fund products as part of its Australian Fixed Interest -Mortgages sector review. The funds included six conventional mortgage funds, two hybrid funds, and one high-yield mortgage fund in the rated peer group, released today. More than half the fund ratings remained stable at three stars, but there were four rating actions, three of which were influenced by fund structural changes associated with fund liquidity management.

We upgraded two funds, the Latrobe Australian Mortgage Fund-Pooled Mortgage Option to four stars and the Australian Unity Mortgage Income Trust to three stars. We removed from ‘On Hold’ and assigned a three-star rating to the Challenger Howard Mortgage fund.

We only rate one fund as two stars, the OnePath OA IP-OnePath Mortgage Tr No. 2 fund, which OnePath Funds Management has decided to compulsorily return capital to investors over the next three to five years.
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S&P Fund Services analyst Peter Ward said: “We have not seen a uniform approach among mortgage fund managers or consistent timing in resolving liquidity issues. We consider this to be a reflection of the different underlying investor base, underlying investments, and different managers’ mortgage fund sector outlook.”
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“Three funds, managed by Australian Unity, Challenger, and OnePath have changed their redemption mechanisms. Each solution has provided improved certainty, but outcomes differ. The changes have contributed to our decisions to upgrade the Australian Unity fund to three stars from two stars and to resolve the long-standing ‘On Hold’ ratings on the Challenger and OnePath funds,” added Mr. Ward.
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Key areas of focus during this review included fund managers’ product strategies, investment team continuity, liquidity and redemption provisions, lending competition and margins, portfolio credit quality/arrears and defaults, and fees.

Click for a full list of funds rated in the S & P Australian Fixed Interest – Mortgages Peer Groups

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S&P Assigns Three-Star Rating To MLC Global Property Securities Fund

Wed, 13 Apr 2011 01:53:09 +0000

Standard & Poor’s Fund Services today removed from ‘On Hold’ and assigned its three-star rating to the MLC Global Property Securities Trust. We placed the fund ‘On Hold’ last year when portfolio manager Paul Duncan resigned from MLC Investment Management Ltd. The three-star rating represents a downgrade from the fund’s previous four-star rating.

We consider that Mr. Duncan’s departure, together with Jason Hazell’s departure earlier in 2010 has resulted in a loss of multi-management experience and expertise, as well as knowledge of the fund and the underlying managers. The effect of these departures has led to our reduced rating conviction.

“We hold new portfolio manager, Stuart Keighran in high regard, although his multimanager role is somewhat of a departure from his previous role as a property securities fund portfolio manager,” said S&P Fund Services analyst Peter Ward.

“We expect conviction to build as Mr. Keighran settles into his new role and builds his fund manager knowledge and relationships with assistance from his MLC team members. His strong investment experience will stand him in good stead, together with the framework provided by MLC’s multi-manager research, philosophy, processes, and portfolio implementation capability,” said Mr. Ward.

The funds affected by this announcement are:

(headline funds in bold)

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S&P Three-Star ‘NEW’ Rating for Glennon Capital Small Companies Portfolio

Sun, 10 Apr 2011 23:23:02 +0000

Standard & Poor’s Fund Services today assigned its three-star ‘NEW’ rating to the Glennon Capital Small Companies Portfolio, a SMA model portfolio which is managed by Glennon Capital and available on the HUB24 platform.

Glennon Capital is a recently established independent boutique firm specialising in the management of listed Australian-equity portfolios with a focus on active small-cap strategies. Michael Glennon is the key principal and lead portfolio manager.

“We consider Mr. Glennon an experienced and capable manager who has demonstrated an ability to outperform the market across more than a decade of small-cap investing. He is supported by senior analyst Jeremy McNally, and the portfolio is well managed with respect to mitigating SMA-specific risks. While we consider the team’s resourcing as adequate, it is below that of higher-rated peers,” said S&P Fund Services analyst John Huynh.

“Although we have a positive view on Mr. Glennon, the team is relatively under-resourced and lacks the depth of experience of some more established small-cap managers. This is a common characteristic of small start-up boutique managers,” said Mr. Huynh.

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Standard & Poor’s assigns ‘STRONG’ rating to HUB24’s Portfolio Service SMA Platform

Wed, 09 Feb 2011 22:45:38 +0000

HUB24, a wholly owned subsidiary of ASX listed stockbroker and wealth management utility, Investorfirst Limited (ASX: INQ), is pleased to announce that following the inaugural review by Standard & Poor’s (S&P) Funds Services, that HUB24’s SMA Platform was given a ‘STRONG’ rating.

In its report, S&P noted that the ‘ “STRONG” rating reflects the benefits of a strong product and service offering, timely execution of portfolio managers’ investment decisions, cost effective management of trades, and a technology platform that is convenient for advisers and portfolio managers.’

The review went on to say that, ‘having now established an extensive product and service offering, advisers have the ability to use the platform as their main or sole investment implementation application. The service is convenient and simple to use for advisers and portfolio managers. Additionally, the service provides direct data feeds (EPI 4.0) into the largest adviser software applications.’

Commenting on this review, Chief Executive Officer of Investorfirst, Mr Darren Pettiona, said “It is pleasing to receive independent confirmation of the HUB24 SMA platform. We have a strong and stable team, with each member playing an equally important role in our success.”

“S&P’s review process is extremely thorough and this rating not only recognises HUB24’s development achievements but also our deep understanding of SMA specific risks and commitment to very high implementation standards – all critical components of efficient, transparent and effective portfolio delivery to investors.”

The key strengths stated in the report include:

Cost effective management of trades, both in relation to brokerage rates (5.5 bps) and the minimisation of market impact price risks.
Investment decisions are implemented on a same-day or next-day basis, greatly mitigating a number of SMA-specific risks.
The platform’s online tools are convenient for both advisers and portfolio managers.
The SMA product range is large, with 25 investment managers and 58 SMA model portfolios. The platform also provides access to a broader asset-class menu, including managed funds, exchange traded funds (ETFs) and direct equities.
Internally developed IT systems that, among other things, enable the manager to respond to client requests for additional functionality.
The management team has a strong pedigree and a proven track record in the development of financial planning software.
Model portfolio managers are empowered to easily manage and maintain their portfolios through an online “work bench”.
Reporting of performance differentials between a model portfolio and unit trust version (where one exists) provides advisers valuable transparency regarding the efficiency of the model portfolio.
As a part of the review process S&P noted that it believed that ‘the risk that the service will be discontinued at some future point is extremely remote based on the manager’s financial position, the strategic importance of HUB24 to the growth prospects of the listed entity that owns HUB24, and solid client prospects based on the strength of the service offering.’

A full copy of the S&P Report is available on the Investorfirst Ltd website http://investorfirst.com.au/archives/1235

Additionally more information about S&P’s SMA ratings approach can be found in the explanatory guides: ‘Guide to S&P SMA Model Portfolio Ratings’ and ‘Guide to S&P SMA Model Platform Ratings’ on the Standard & Poor’s website http://www2.standardandpoors.com/portal/site/sp/en/au/page.article/2,4,2,0,1148442711865.html

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Fund Credit Quality Rating On Perennial Cash Enhanced Fund Withdrawn

Thu, 16 Sep 2010 06:01:17 +0000

Standard & Poor’s Ratings Services announced today that it has withdrawn its ‘AAf’ fund credit quality rating on the Perennial Cash Enhanced Fund. The rating has been withdrawn at the request of the manager, Perennial Investment Partners Ltd. At the time of the withdrawal the fund was rated ‘AAf’.

Rating Definition: Fund Credit Quality Ratings

Fund credit quality ratings, identified by the ‘f’ subscript, are assigned to fixed-income funds and other actively managed funds that exhibit variable net asset values. These ratings are current assessments of the overall credit quality of a fund’s portfolio. The ratings reflect the level of protection against losses from credit defaults and are based on an analysis of the credit quality of the portfolio investments and the likelihood of counterparty defaults. Fund credit quality ratings are identified by the ‘f’ subscript to distinguish the fund credit quality rating from a Standard & Poor’s traditional issue or issuer credit rating. A fund credit quality rating is not a recommendation to buy, sell or hold the shares of a fund. A ‘AAAf’ rating indicates that the fund’s portfolio holdings provide extremely strong protection against losses from credit defaults. A ‘AAf’ rating indicates that the fund’s portfolio holdings provide very strong protection against losses from credit defaults. An ‘Af’ rating indicates that the fund’s portfolio holdings provide strong protection against losses from credit defaults.

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