S&P set for Australian exit
Standard & Poor’s (S&P) – a name synonymous with credit ratings and research the world over, will no longer have an Australian ratings and fund services presence from 1 October this year.
As such, it is the final year the research house will appear in Money Management’s annual Rate the Raters survey and signals a contraction of the Australian fund ratings market to five major players.
After the closure announcement, fund managers began withdrawing their funds for ratings, with ANZ/OnePath, Australian Unity, Perpetual, BT, Sandhurst Trustees, Premium China Fund, Macquarie Group and Challenger's Howard Mortgage funds all opting out of S&P’s services until only three fund managers remained in June.
But a number of senior departures, company restructures and unwieldy market conditions kept S&P busy in 2012 as it continued to weigh up the facts in its assessment of Australian funds.
In June, S&P head of research for fund services Leanne Milton said the research house was still doing sector reviews and speaking with the fund managers it rated, although by July most of the company’s dealer group clients had moved on.
Chief executive of van Eyk Research Mark Thomas said he expected the Australian ratings house market to shrink further. He said globally there were three credit ratings agencies – Fitch, Moody’s and S&P, while Australia still had five.
Morningstar’s Tim Murphy also expressed his concern at market saturation and said the Australian funds industry was the most over-researched in the world.
But S&P’s fund services manager Leanne Milton said the company’s departure would leave a gap in the market due to its broad coverage of funds and other differentiators in its business model.
S&P reached Australian shores in the mid-80’s – long after it had developed its first investor index, the S&P500, in 1957 and long after it had begun charging for ratings in the late 1960s.
But it has had a massive impact on the Australian funds ratings industry with 94 per cent of respondents in Money Management’s 2010 Rate the Raters survey saying they leaned on S&P’s ratings services.
And despite the closure announcement in February, 74 per cent of fund managers in this years’ Rate the Raters (published in June) were still rated by S&P.
AUTHOR
Staff Writer
Recommended for you
Oksana Patron examines how research houses feel about the ratings ascribed to them by financial planners and how they addressed the potential conflict of interest areas.
After years of indecisiveness, fund managers have voted for the stability of research teams while identifying potential conflicts of interest, Oksana Patron writes.
For the first time in more than four years financial planners have chosen Morningstar as their preferred research house, effectively ending the long-lasting reign of Lonsec, Oksana Patron writes.
Oksana Patron examines the relationship between fund managers and research houses and whether it has been affected by the recent COVID-19 pandemic.
