Research house Standard & Poor’s (S&P) has questioned whether two Colonial First State (CFS) multi-manager portfolios would achieve desirable long-term results for investors at the same time assigning them a new two-star rating.
The CFS FirstChoice Boutique and Geared Boutique Australian Share funds comprise equal allocations to five managers with 452 Capital, PM Capital and Acadian Asset Management Australia being key investments.
S&P said CFS FirstChoice would retain investments with the key managers as long as it was comfortable with them, despite acknowledging that these managers may not necessarily be the best within the Australian boutique universe.
“In S&P’s view, this arrangement restricts the fund’s flexibility in the event it has concerns with any of the cornerstone managers, and S&P questions whether this approach to portfolio construction will lead to the most desirable long-term outcome for investors,” S&P fund analyst Andrew Yap said.
S&P would also like to see CFS FirstChoice consultant Mercer play an active role in helping the firm determine a strategic allocation to the managers, he said.
CFS head of FirstChoice Investments Scott Tully said: “Colonial First State takes its fiduciary duties very seriously and ensures investors’ long-term interests are part of the portfolio construction process.”
Solaris Investment Management and Greencape Capital are the other two managers in the CFS FirstChoice Boutique and Geared Boutique Australian Share funds.
CFS is owned by the Commonwealth Bank of Australia, the country’s biggest lender by market value.
