The A rating on the £321.4m Templeton Global Euro fund is “under intense pressure” because of a legacy of poor performance, according to Standard & Poor’s (S&P).
In its latest report on the portfolio, the ratings agency notes the fund has sat in the fourth quartile for five years after four years of “consecutive sub-median performance”.
“The team cited stylistic reasons for the underperformance, particularly in 2010 when the fund’s core-value bias was clearly out of favour with markets focused on quality growth names,” the report says.
“While this was to some degree true, the fund did worse over the year than a number of other deep-value funds within the sector due to stock selection.”
S&P notes the portfolio’s overweight position on financials proved to be premature, while its performance was hampered by an underweight to consumer stocks.
The agency adds that the fund recently changed hands, with Dylan Ball replacing Martin Cobb as lead manager on the portfolio from October. Ball has a track record that would pass S&P’s quantitative hurdle, it says.
“Continued underperformance and our concerns on stock selection are putting the fund’s rating under intense pressure,” the report concludes. “However, with the advent of a manager with a better (if short) record, the fund just hangs onto its S&P A rating for now.”
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