S&P reinstates CFS ratings after 452 cut
Standard and Poor’s Fund Services (S&P) has reinstated its two-star ratings on two Colonial First State (CFS) multi-manager portfolios after having placed them ‘on hold’ in August due to their ties to 452 Capital.
452 Capital was one of five equally weighted managers held in the multi-manager lineups of the CFS FirstChoice Wholesale Boutique and Geared Boutique Australian Share Funds, but CFS has now notified S&P that it intends to remove 452 from the lineup of each of the funds.
The change in ratings was more a reflection on the constraining nature of the funds’ investment process rather than the investment team, according to S&P analyst Andrew Yap.
Each fund retains a 40 per cent aggregate exposure to PM Capital and Acadian as ‘cornerstone’ investments, meaning those managers will be retained indefinitely regardless of factors such as performance or change in ownership structure, Yap said. Termination would only result from exceptional circumstances as in the case of 452 Capital, he added.
“The incorporation of cornerstone investments is not uncommon for single-sector multi-manager offerings. The issue here is the size of these allocations and simplified approach to manager allocations, with each underlying manager receiving a fixed and equal weighting,” Yap said.
“The restrictive nature of these factors reduces the team’s flexibility when it comes to manager selection and allocation. These are areas in which we believe the team has become increasingly effective,” he said.
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