Challenger fund 'on hold'

Ratings house Standard & Poor’s (S&P) has placed another fund, the Challenger High Yield Fund, ‘on hold’ after Challenger Managed Investments Limited made changes to redemption arrangements in the face of continuing market volatility.

S&P Fund Services analyst David Erdonmez said the ‘on hold’ designation had been applied to the High Yield Fund after Challenger announced that redemptions would be offered on a quarterly basis and would be subject to market conditions.

He noted that this was a change to previous arrangements under which Challenger met redemption requests within five working days and, under the constitution, was limited to a maximum of 30 days to make the payments.

Erdonmez said the high yield fund was not a traditional fixed interest offering as its investments were largely made up of hybrid securities, corporate debt and asset-backed securities.

“Due to the current volatility in financial markets the tradable market for these securities is not deep,” he said. “These conditions in conjunction with net outflows from the fund have resulted in the action being taken by the manager.”

He said S&P would be taking the opportunity to meet with Challenger during its upcoming review of Australian fixed interest funds.