Standard & Poor's (S&P) has downgraded the UBS Australian Share Fund from four to two stars following five executive departures in the last six months.
According to S&P fund analyst Marcus Hanel, the departures indicate a cultural problem within the Swiss manager.
"Staff retention is one of the most crucial aspects for a fund-management organisation," Hanel said.
UBS has demonstrated that it is not capable of retaining key people, and this puts at risk the ongoing ability of the Australian equity fund to deliver upon its objectives," Hanel said.
S&P's new rating recommends that advisers seek an alternative manager when looking for a core Australian equities exposure.
"S&P recognises the robustness of the investment process and the commitment to find suitable replacements, as demonstrated through the appointment of Simon Shields as the new head of Australian equities, but this fails to outweigh the negative effects of recent events," he said.
"The team is still understaffed and will need to be bolstered to ensure adequate stock coverage."
In the last six months, five key executives have left UBS.
The departures include head of equities Paul Fiani, portfolio manager Shawn Burns, head of research John Moran, investment analyst Marcus Truman, and emerging companies' portfolio manager Mark Buizen.
