Standard & Poor’s (S&P) has changed the ratings of three Challenger Australian equity strategies following the company’s announcement of the expansion of its boutique funds management business.
The Challenger Australian Share Income Fund has been placed ‘on hold’, while the ratings of the Wholesale Australian Share Fund and the Wholesale Select Australian Share Fund have been lowered from four to three stars.
The changes come after the announcement that Challenger Financial Services has established an Australian equity income funds management business, Merlon Capital Partners.
The current portfolio manager for the Challenger Australian Share Income Fund, Neil Margolis, will head up the business, while the rest of the team has been carved out from Challenger’s broader Australian equities team.
“While S&P believes that the establishment of Merlon Capital Partners is likely to prove a positive development for the management of the Australian Share Income Fund, we have placed the fund ‘on hold’ pending an upcoming review that will include assessment of the team’s fundamental research coverage,” said S&P analyst Michael Armitage.
In relation to the downgrades, S&P analyst James Gunn said that while a number of process and team changes had been made to address past performance issues, S&P still had a lower level of overall conviction.
“This has been exacerbated by recent departures, which in S&P’s opinion have left the large-cap team stretched, particularly in comparison to its previous capacity,” Gunn added.
