Research house Lonsec has downgraded AMP Capital's $1.46 billion Enhanced Yield Fund (EYF) from recommended to a hold.
Lonsec general manager of research Grant Kennaway told InvestorDaily it was not suitable for investors to allocate new money into the product, as volatility in global markets intensifies.
He added there were no systemic or liquidity issues with the product.
"We have just done our sector review process and at this time we think hold is the most appropriate rating for the product, which basically means that the product is just fine for existing investors," Kennaway said.
"It is very much more around the style of the product, [which] is investing in private debt and it is really just issues around where we think the risk [and] return [characteristics] of the product are at this time."
An AMP Capital spokesperson said EYF was meeting new applications and fund redemptions.
"AMP Capital continuously monitors the fund's position and believes it is well-structured for current conditions, with 49 per cent and 51 per cent asset allocation to traded and direct assets respectively," the spokesperson said.
EYF has a split allocation to AMP Capital's Structured High Yield and Trade High Yield funds, exposing investors to private debt, corporate bonds and hybrid securities in Australia, Europe and the United States.
Bond risk in the Asia-Pacific region soared yesterday as Lehman Brothers filed for bankruptcy, leaving investors concerned over how the US firm's securities may be unwound.
The Markit iTraxx Australia Index climbed over 20 basis points to around 180, indicating that the credit quality of local firms is withering.
