BT Funds Management is feeling the heat of the recent slump in its Australian equities performance.
BT’s flagship Imputation Fund has been downgraded from four stars to two stars by Assirt while its balanced funds have been put on hold by both Assirt and van Eyk Research. BT was also downgraded from four stars to three by Morningstar late last year.
For its part, BT acknowledges that 2000 was a poor year for its Australian equities team and some of the criticisms of its investment process. However, head of retail Rob Coombe says the slump in 2000 was consistent with the concept of active management. BT also significantly underperformed the All Ordinaries index in 1995 and 1989 but has outperformed the index in all other years since 1987.
Coombe says BT’s flagship balanced funds still have strong performance figures over the long term, and are in fact top quartile performers over five years. He also says BT’s equities performance is “showing signs of a bounceback” and outperformed the All Ords by 2 per cent in January with a 6.5 per cent absolute return.
Assirt says one of the key determinants of the downgrade was BT’s “failure to implement an effective risk management regime”. Coombe says the group has been working on integrating risk management into its investment process.
Assirt is also critical of BT’s portfolio construction, saying it is “akin to a ‘ten stock punter portfolio'”. Coombe acknowledges perceived weaknesses in portfoilio construction but says BT has no more of a concentrated portfolio than any of its major competitors.
“The are correct when they say that our top ten holdings make up 60 per cent of the portfolio but our research tells us that for the vast majority of fund managers, the top ten stock accounts for between 45 and 65 per cent of their portfolio,” he says.
