Gordon grender's North america growth fund upgraded to AA in latest sector review
Gordon Grender's GAM North America Growth portfolio has been upgraded from A to AA in the latest review of the sector by Standard & Poor's.
In addition the existing AAA rating for James Abate's GAM Star American Focus Fund remains. In total GAM has five of its North American funds rated AA. At the same time three of Aberdeen's North American funds lost their ratings. The downgrade was a result of the departure of Rupert Della-Porta, the group's most experienced US manager, according to the S&P analysts. The only Aberdeen North American fund to retain a S&P rating is Aberdeen American Opportunities, with a single A, run out of the US by mutual fund group Phoenix.
According to Standard & Poor's, value-orientated fund managers had a competitive advantage over the past year. The more extreme 'absolute value' managers did outperform as a group and the 'aggressive growth' managers generally did poorly, Linda-Jane Coffin, director and head of equity research at S&P, said.
Coffin added: 'The distribution of market returns was asymmetrical in 2002, with only a few strong outperformers and a far greater number of extreme underperformers. Many a manager regrets having owned Tyco International, Adelphia and WorldCom in 2002.'
Other funds to be downgraded over the period included Aegon American, from AA to A, Britannic American Growth, from AA to under review, MFS US Growth Equity, down from AA to A, and Newton American fund from A to not rated. Aegon American has been moved down one rating band because S&P is uncertain what the effect of Aegon switching from a team of dedicated regional analysts to global sector research is going to be.
The Newton fund has lost its rating on the back of the analyst's concerns over the declining performance trend since the lead fund manager relocated to Western Canada, placing her eight time zones away from the global research analyst team that supports the management process.
There are now no onshore AAA-rated portfolios and only four other offshore North American equity portfolios are rated AAA by Standard & Poor's in addition to Abate's fund. These include DIT-Dresdner Global Strategies Fund ' US Equity Fund and Raiffeisen US Aktien Fund.
Two Fidelity Funds portfolios: American Growth and American Special Situations, both managed by Neal Miller, were upgraded to AAA based on what the analysts believe is the ongoing strength of the manager's highly individualistic approach across varied market conditions. Invesco GT US Structured Large Cap Core went from being a newly covered fund to being awarded an AA rating while five of JP Morgan Fleming's US portfolios moved from newly covered to A. Meanwhile two of Franklin Templeton's funds, US Aggressive Growth and Aggressive Growth, failed to pass the quants screen for inclusion in the ratings.
Coffin said: 'Market conditions in 2002 were more mixed than they had been in previous years. They were not characterised by a single broad trend, such as the momentum rally of late 1999/early 2000 and the subsequent compression of growth stock multiples in the balance of 2000 and into 2001. Instead, 2002 was a period of extreme volatility and rapid leadership shifts that challenged even the most adroit fund managers.'
Economic conditions were directionless, providing plenty of justification for both the optimists and pessimists, she noted.
US equity markets produced their third consecutive year of negative performance in 2002, making the bear market that began in 2000 the longest and steepest since the Great Depression. She added: 'The pain of this decline was compounded further by the average fund manager once again underperforming the broad market indices.'
For the annual period ending 1 November 2002, the S&P 500 Composite index was down 15.1% in dollar terms, compared to a sector median -16%.
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