The non-bank lender had previously pushed back strongly against Count’s move, questioning the basis for the recommendation and highlighting its long-term performance record.
Namely, back in March, Count advised its 550 advisers to sell out of the ASX-listed Metrics Master Income Trust and Metrics Income Opportunities Trust, as well as the unlisted Metrics Direct Income Fund, warning of risks in private credit.
At the time, the decision raised eyebrows, particularly given the high ratings assigned to the funds by Lonsec and claims that Count made the call without meeting with Metrics – something InvestorDaily understood to be a standard step in any due diligence process.
Lonsec has now downgraded the Income Opportunities Trust from “recommended” to “investment grade”, and the Master Income Trust from “highly recommended” to “recommended”. The downgrades were first reported by The Australian Financial Review but have been verified by InvestorDaily.
InvestorDaily understands that the unlisted Metrics Direct Income Fund has also been downgraded from “highly recommended” to “recommended“.
Lonsec rates funds as highly recommended, recommended, investment grade, fund watch, redeem, or screened out.
Metrics managing partner Andrew Lockhart had previously criticised Count for making its recommendation without meeting with the firm, noting that repeated invitations from Pinnacle Investment Management to engage have been declined.
“I am disappointed that the position that they have got to is a recommended redeem, and I’m certainly not aware of any reason why that would be an appropriate recommendation for an investor,” Lockhart said at the time.
In a separate statement made to InvestorDaily at the time, a spokesperson for Metrics said: “We’re very proud of the strong performance outcomes we’ve delivered for investors.
“Private credit is growing because the asset class is meeting the needs of a large investment cohort, in particular those seeking an allocation that can provide capital stability, income and portfolio diversification. We strongly believe this growth has a very long way to go.”
The developments come as the corporate regulator continues to monitor private credit and private markets more broadly.
Just last month, the corporate watchdog signalled it will not sit on the sidelines as private markets boom, declaring it is “not a passive observer” and will not take a “wait and see” approach.
InvestorDaily understands the regulator is preparing to release a progress report on private credit later this month, with further detail on surveillance findings to follow later in the year.
A draft report, seen by some market participants, is said to call out both good and bad practices and has reportedly been well received.
ASIC has already flagged that its survey of private credit managers will focus on governance, valuation, liquidity, conflicts of interest, fees, disclosure and distribution.
Speaking at the Australian Wealth Management Summit last month, Lockhart said that what’s been painted as a probe into private credit is “actually a review into private markets”.
In his words: “ASIC is quite right to say, ‘Are managers that are operating in private markets adhering to high corporate governance standards and are doing things that are appropriate to deliver good outcomes for investors?’ That’s really the basis for the discussion paper. It wasn’t an investigation into additional regulatory requirements in relation to private credit.”
Lockhart did, however, acknowledge that one outcome of the process has been ASIC subjecting some private credit managers to reviews as it works to better understand the sector.
But Metrics, he assured, was built different – “as an institutional-grade asset manager” with independent oversight from day one.
“When we set up the business, we set it up with an independent responsible entity and trustee to ensure there was appropriate governance and oversight of the activities of the investment manager. That regime still remains today, and I think it’s the best thing,” he said.
The weak spot, he argued, is elsewhere – managers “that perhaps don’t have the necessary skillset, resources, the technical capacity”, raise a fund in a wholesale vehicle with a related party trustee as the trustee of that entity.
InvestorDaily understands that Metrics has maintained its high ratings with Zenith.
Lonsec has maintained its policy of not publicly commenting on its research decisions.
