S&P removes ‘on hold’ tag for 18 funds

Standard & Poor’s (S&P) has removed the ‘on hold’ ratings on 18 funds that were potentially affected by the temporary ban on short selling put in place last month.

Fifty seven funds were initially placed ‘on hold’ by the research house as it analysed the effect the ban on short selling by global regulators would have on the funds’ ability to meet expectations.

According to S&P Fund Services analyst Simon Scott, of the initial 57 placed ‘on hold’, 22 have now had their ratings reinstated.

S&P said it has now gained a “level of comfort that the affected funds were able to continue to execute their mandates”.

With the exception of one, all the funds affected were in the multi-manager, multi-strategy peer group. The funds in question allocate to various absolute-return strategies.

S&P said while the short selling restrictions would affect immediate performance, it should not hinder the investment process of these funds.

Scott said while the research house does “expect volatility in the short-term”, over the medium term it expects the multi-manager/strategy funds to meet their objectives.

“Ongoing liquidity in markets and the level of redemptions received by funds, whether at the underlying or fund-of-fund level, is at the forefront in our maintenance of the ratings,” a statement from the research house said.

The research house did flag the business and operational risk of smaller hedge fund managers as a “concern”, and one it would continue to monitor.

The remaining peer groups affected are the single and multi-manager long/short funds, with S&P stating that further clarification from the Australian Securities and Investments Commission around the lifting of the ban is required before the ‘on hold’ ratings for the domestic funds can be removed.

Scott said S&P would finalise its review of international long/short managers later this week.