Several rating agencies have adjusted their ratings for the Challenger Howard Mortgage Fund, after Challenger restricted investors' ability to withdraw from the fund.
Standard & Poor's (S&P) has put the Challenger Howard Mortgage Fund, the Challenger Howard Wholesale Mortgage Fund, and the Challenger Mortgage Plus Trust-Professional on hold, meaning the ratings for the funds are temporarily suspended.
"The increase in net outflows from the fund has resulted in the action being taken by the manager," S&P Fund Services analyst Peter Ward said.
"S&P will have the opportunity to review the situation when S&P meets with the manager in the upcoming review of Australian mortgage funds."
Morningstar decided to downgrade the Challenger Howard Wholesale Mortgage Fund to a hold recommendation, citing liquidity restrictions as the main reason.
"Investors looking for short-term liquidity or a guarantee should look elsewhere," said Morningstar analyst Tim Murphy. "Longer-term investors may still find the higher returns on offer here suitable reward for the additional risks."
Lonsec is planning to place all mortgage funds on hold, The Australian Financial Review reported yesterday.
The Challenger Howard Mortgage fund has seen a dramatic outflow of funds since the Government announced it will guarantee bank deposits. Investors who are looking for security are now taking their money out of mortgage funds and into accounts that fall under the guarantee.
"We believe we are seeing unintended consequences of the government's initiative in relation to supporting the banking system," Challenger cief executive funds management Rob Adams said. "We will keep a close watch on the situation and review the policy when conditions normalise."
