The reset of the watermark, combined with a relatively steep fee structure, was reason enough for Morningstar analyst Tim Wong to set the fund on avoid.
"Charging a performance fee on top of a wholesale base fee that's not below average is discouraging enough, but Challenger compounded matters by resetting the high watermark after appointing the new team," Wong wrote in his report.
"This is very disappointing for existing unitholders, who are far from recovering from the substantial losses and appalling underperformance of 2008."
Challenger spun off its Australian equities business in July this year and employed former AllianceBernstein director of Australian equities Johan Carlberg to lead the new firm.
A spokesperson for Challenger pointed out that Alphinity was an independent company from Challenger.
"The comments will grab attention, but query whether they make sense because the money isn't actually being run by Challenger," a Challenger spokesperson said.
"Is Morningstar suggesting that rather than be incentivised to perform, this new team should be punished for the perceived transgressions of others? If so, this would seem counterproductive to achieving future investment outperformance."
