Financial services firm Axa Australia has reshuffled its licensee model portfolios.
The company had terminated the Axa Global Equity Growth Fund from the international equities component of the superannuation accumulation portfolio as it consistently underperformed and showed excess volatility, Axa national manager of technical, research, advice and paraplanning Robert Thomas said.
The fund was replaced with the Aberdeen International Actively Hedged strategy.
"We needed to find a fund that would complement the existing portfolio," Thomas said.
"[Aberdeen] have an active but modest hedging policy and they have embedded losses that would be of value to our super clients."
Research house Standard & Poor's Fund Services (S&P) downgraded the Axa Global Equity Growth strategy to three stars from four in March.
The fund's manager, Alliance Growth, had experienced continued staff turnover, particularly at the sector head level, S&P fund analyst Tom Mills said.
"Alliance continues to experience high staff turnover, particularly at the sector head level, and has downsized its analyst research base," Mills said.
"We consider these changes significant, particularly for an investment approach that relies heavily on a large team of analysts for depth and breadth of coverage and the global sector heads for stock selection - both key alpha drivers in a bottom-up approach.
"This has led to a deterioration in our conviction for the offering, which is reflected in a rating move to three stars."
The Axa super accumulation model's international equities component has five managers with equal weightings: Platinum International, Axa Global Equity Value, Zurich Thematic, Grant Samuel Epoch Global Equity Yield and Aberdeen International Actively Hedged.
Thomas said Axa Global Equity Value was being retained because it added diversification.
The overall portfolio had been positioned defensively and should do well in the event of a slowdown in global growth, he said.
Axa's super portfolio returned an annualised 7 per cent after fees in the eight years to March 2011, compared to 6.6 per cent for the model's benchmark.
Additionally, several changes were made to the income defensive and moderately defensive portfolios across all of Axa's models.
Allocations to funds including Colonial Global Credit Income, Bentham Syndicated Loan and BlackRock Monthly Income were reduced.
"For the conservative clients we have reduced exposure to credit funds and made the portfolios more defensive by adding traditional cash and fixed interest," Thomas said.
"The income focus of these funds means it may have inferior performance in strong markets but should outperform in weaker markets, whilst providing reasonably consistent levels of income payments."
"We still like these managers; we are just reducing exposure to them for the conservative profiles."
Axa also swapped Arrowstreet hedged to Arrowstreet unhedged in the tax-aware model.
The move was partly a currency call and also because the unhedged product was more tax efficient for high-income earners, Thomas said.
The changes would be effective from 1 July.
"We would expect the announced changes we discussed to continue to produce consistent results for advisers and their clients," Thomas said.
