The ABN Amro Equity Income Fund, managed by George Luckcraft, has been awarded AAA status by S&P in ...
The ABN Amro Equity Income Fund, managed by George Luckcraft, has been awarded AAA status by S&P in its review of the UK Equity Income sector, despite being rated for the first time.
Luckcraft achieved his performance by adopting a barbell approach of balancing income and growth stocks within his portfolio. The fund produced a total net return of 54.8% in the 12 months to 1 October compared to 19.1% from the Credit Suisse Monthly Income Fund which was the next nearest fund in the S&P UK equity income sector.
His strategy of selecting long term growth stocks, which are relatively insensitive to macroeconomic trends, has led him to diverge significantly from the benchmark FTSE 100 index over the 18 months to 1 October, the period that the S&P review covers.
Deutsche Asset Management also achieved a notable re-rating with Adrian Frost's UK Equity Income Trust receiving an upgrade from A to AA.
Frost, who last year was judged Investment Week's UK Equity Income Fund Manager of the Year and awarded the inaugural Achievement Award for his continued consistent long term performance, was praised for his well timed shifts between growth and value which allowed him to benefit from the rise of tech, media and telecom stocks but avoid much of the subsequent fallout.
The highest profile downgrades were Perpetual, with Neil Woodford's High Income and Income funds reduced from AAA to AA, and HSBC which saw Tim Russell's Income Fund reduced from AA to A.
The reason given by S&P for the demotion of Woodford's funds was that both portfolios failed to pass the S&P quantitative hurdle for consistency required to merit an AAA-rating.
This comes despite his AAA-ratings for both funds in 1999/2000 when the S&P reports noted the volatility of his funds' short term returns which were a result of his active, high commitment style that "often leads him to suffer periods of underperformance while maintaining an almost unparalleled long term track record."
Woodford said that citing his volatility as a reason for downgrading his funds effectively amounted to creeping indexation.
He said: "What that tells you is that they have downgraded me on the basis that I didn't participate in the fall in the market. That, to my mind is the very core of what we are trying to avoid."
James Tew, European head of research at S&P, said that the downgrade reflected two periods of poor performance compared to peers during the three 12 month periods up to 1 October.
The report citing the reasons for Russell's demotion has not yet been released, but S&P said that the HSBC UK equity income team remains below strength and underperfomed over the 12 months to 1 October.
Other funds that suffered a reduction in ratings from AA to A were Dresdner RCM UK Equity Income, Fidelity Income Plus, Royal & SunAlliance Equity Income, Save & Prosper Premier Equity Income, and Save & Prosper Extra Income.
Funds that are no longer rated because they failed S&P's initial qualitative screen are Baring Equity Income Trust, Cazenove UK Equity & Bond Fund, HSBC Extra High Income, HSBC High Income and HSBC High Yield Trust. Upgrades from A to AA were achieved by the Gartmore UK Growth & Income Fund, AXA Sun Life Higher Income, Merrill Lynch Income Portfolio Fund and the Invesco GT Income Fund.
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