Lonsec first to shift rating on Colonial small cap fund
Lonsechas become the first research group to changes its rating for theColonial First State(CFS) Future Leaders Fund, moving to a hold position after senior portfolio manager Barry Henderson indicated he would retire in January.
Other research houses have yet to release an updated rating on the fund, withAssirtandMorningstardue to meet with Colonial today and release their ratings by tomorrow morning.
Lonsec however has said CFS was deserving of some credit with the immediate naming of a successor for Henderson in Graeme Burke, who has been working with Henderson since late 1997.
Yet it qualified those comments by stating that until January 2001, Burke’s role was more towards company research and not specifically portfolio construction.
The reason for the shift early last year was due to Burke assuming full responsibility for the Developing Companies Fund, which is a similar fund to the Future Leaders Fund but with a smaller capitalisation focus.
According to Lonsec, Burke has delivered good results over the last 22 months but his track record is limited and the departure of Henderson is viewed as a loss based on his skill managing the Australian small companies portfolio with a proven track record.
The downgrade of the fund by Lonsec is the third this year, with the previous two downgrades centering on the issues of size and performance, with Lonsec claiming its performance against other small company funds had decreased.
Part of this drop was the result of the managers growth style being out of favour while the size of the fund, currently over $1 billion, or about three per cent of the total Australian small company market by capitalisation, was also of concern to Lonsec.
The research group will meet with CFS next week and hopes to release further analysis after that date.
The small companies market has recently gone through a contraction with a number of managers closing funds to new money withPerpetual,ING,JB WereandInvestors Mutualall making that move in 2002.
However CFS says its funds, which currently have more than $1.35 billion in funds under management between them, will remain open for the foreseeable future.
AUTHOR
Jason Spits
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