Funds including Aviva Investors Professional High Growth Shares, Colonial First State Acadian Wholesale Australian Equity Long/Short, Colonial First State Wholesale Australian Share Long/Short Core, Goldman Sachs Global Flex and Goldman Sachs Hedged Global Flex were all downgraded to three stars from four.
S&P assigned new four-star ratings to products including Ausbil Active Extension, BT Wholesale Australian Long/Short and ING Extended Alpha Australian Share.
Those funds, along with the four-star-rated Grant Samuel Tribeca Alpha Plus, were the highest rated in the review.
"The market continues to question the value of quantitative 130/30 market extension," S&P director Michael Armitage said.
"Given the style bias, they tend to underperform in volatile and/or illiquid market environments, so investors should be prepared for potentially long periods of product underperformance."
S&P assigned high-conviction ratings to relatively few of the managers in the 130/30 category for various reasons, including some managers' inability to demonstrate shorting skills and failure to meet return objectives, Armitage said.
"The managers that have received our higher-conviction ratings have been fundamentally-driven strategies with teams that have shown the necessary skills in understanding short-selling risks," he said.
