HIGH-PROFILE FUNDS DOWNGRADED AS PART OF S&p review, while M&G and Schroders upgraded
Credit Suisse's three income funds have all suffered downgrades as part of Standard and Poor's (S&P) latest review of the UK Equity Income sector.
On the flagship Income and Monthly Income funds, run by Leigh Harrison, S&P said the portfolios have slipped from AA to A due to concerns that the dull track record in recent months may indicate a less efficient use of resources since Bill Mott stepped down in 2003.
On Harrison's Alpha Income fund, which has also fallen from AA to A, the agency said the decision to refocus the product into a more stock-specific portfolio does not fit well with the top-down approach that has typically characterised Credit Suisse's UK equity range.
While Harrison only took over the Income and Monthly Income funds from Mott in August 2003, he has run the Alpha Income portfolio since 1999 when it was a Sun Life of Canada (SLC) product.
DWS Investments' UK Equity Income portfolio has also been downgraded, falling from A to Unrated status.
Peter Fuller, S&P funds analyst, said: "This reflects a period of weak relative returns that have pushed the fund significantly below our performance threshold for rating purposes.
"A further concern is that the fund is managed with 70% commonality with the team's large cap model portfolio, leaving fund manager Graham Ashby very little room to manoeuvre in terms of sector and stock deviations in his search to add value."
In terms of upgrades, both Schroder Income and M&G's Charifund move from A to AA.
The Schroders' upgrade is on the back of the recent reorganisation and refocusing of the research team, coupled with Nick Purves' steady switch over the past 12 months from being an institutional fund manager to one with retail responsibilities.
As for the Charifund, Fuller said the AA rating reflects manager Richard Hughes' continuing ability to meet the fund's highly demanding yield requirement, 60% above that of the market, without compromising total return, or the consistency of his management approach.
Overall, S&P reviewed 29 income funds, with four retaining AAA status, two each from Invesco Perpetual's Neil Woodford and Jupiter's Tony Nutt, 12 funds were rated AA and 13 single A. However, S&P said most managers remain cautious, expecting the ups to balance the downs over the next year.
Fuller added: "Income targets have proved relatively easy to attain in the past 12 months. Companies, from across a broad range of sectors, have raised their dividend payments, allowing fund managers to achieve their targets without having to resort to preference shares, convertibles, bonds or structured products.
"Performance success has tended to come from the FTSE 350 index and particularly from the area of the market that may be loosely described as small large caps and large mid caps.
"FTSE 100 stocks have had their periods of performance but mid caps have made most of the running."