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AMP comfortable with downgrade

AMP Financial Services says it is fixing the areas which resulted in Morningstar downgrading its rating from five stars to four stars.

Tuesday, January 16th 2001, 10:16PM

by Philip Macalister

AMP Financial Services is "comfortable" about research house Morningstar's decision to lower its manager rating from five stars to four stars.

Manager Andy King says being a four star manager "is still a very good upper quartile performance."

"We couldn't be anything but pleased with four stars. It is a very good fund manager rating."

Under the Morningstar system five stars denotes an "excellent" manager, while four stars denotes a "very good quality fund manager.

King says one of the reasons AMP was downgraded is because Morningstar has "changed the way they calibrates their measurement for some measures."

In its report Morningstar said that AMP had been downgraded in a number of areas, including: corporate strength, administration and distribution, and investment management.

Also, it said that "the downgrade has been driven by a fall in the Morningstar Star Ratings of many of AMP’s funds."

"The percentage of AMP funds with five star Morningstar Star Ratings has fallen sharply (down from 34 percent at 30 June 2000 to 12 percent at 30 November 2000), while the percentage of one star funds has more than doubled, from eight to 18 percent over the same period."

King acknowledges the falls but says over the product, or investment cycle the funds will perform as expected.

He also points out that the number of older style funds that AMP has is a negative factor in the ratings process. This comes about because part of the rating is determined by the performance of the funds on a size weighted basis.

While Morningstar said AMP had fallen below average in the areas of corporate strength, administration and distribution and investment management, the trend rating in all these areas was positive.

It acknowledged that AMP was making changes to address these shortcomings. These include "implementing structural/cultural change in accordance with global strategy, and (it) is developing a strategic distribution/sales approach which bodes well for future growth."

King says he is disappointed AMP didn't retain its five star rating when it went through the regular two year review.

You can read Philip's blog here: http://www.goodreturns.co.nz/blog/

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