Research firm Morningstar has downgraded Suncorp's Australian equities team to avoid following the defection of its entire investment staff to start a boutique fund.
Morningstar said the staff exodus meant the outlook for Suncorp's equities team was bleak.
"Despite the firm's best efforts, we have real doubts about Suncorp's ability to attract suitably qualified personnel in a reasonable timeframe, given the war for talent taking place in the Australian equities space," the firm said.
Suncorp's nine-strong team, which was led by Denis Donohue, left last week to establish Solaris.
The firm said it had appointed its general manager of investment strategy, Stephen Lam, as interim head of equities until a more permanent solution could be found.
"We think it will be a real challenge for Suncorp to attract appropriate levels of talent to run this strategy and Lam faces an uphill battle to maintain the strong long-term track record in the meantime," Morningstar said.
Solaris will operate under the umbrella of Pinnacle Investments, a fund incubator started by former Perennial chief Ian Macoun and Wilson HTM in 2006.
Suncorp has arranged for six team members to stay on at the firm until the end of December.
Morningstar said the staff defections highlighted the importance of appropriate pay structures that align interests and encourage long term staff retention.
"Suncorp had yet to implement any material long-term incentive program, which may have helped prevent the current situation," the firm said.
"For potential investors, avoid this strategy and look elsewhere for now."
Suncorp executive general manager for asset management Brett Himbury told Investor Weekly last week the company was already underway seeking long-term replacements.
He admitted it would be challenging to find people in a tight labour market but was confident of finding replacements.
"We now have a far more formidable funds management business today than we had before," Himbury said.
"I'm confident there will be equities teams out there that will be very interested in talking to us."
