Boutique Australian fund manager Basis Capital has been given yet another blow after research house Morningstar handed down an avoid rating.
The researcher announced yesterday it had downgraded the manger from its previous hold ranking.
In a report to market, Morningstar said investors have had no choice but to stand by and watch after Basis Capital suspended redemptions from its Yield Fund in July.
“The fund is effectively being wound up, and we recommend those invested here put in their redemption requests,” the company said.
“The success of Basis Capital and in particular the leveraged Yield strategy was tied intimately to the state of credit markets. This propelled the strategy forward to post 20 per cent annual gains in the early to mid-2000s, but when liquidity dried up during the credit crunch in mid-2007, the strategy entered perilous waters.”
While Morningstar credited joint managing directors Steve Howell and Stuart Fowler for their past experience as managers, they stressed the ability to achieve higher than normal returns is accompanied by extra risk.
“Howell and Fowler have now put the fate of this strategy into the hands of receivers, who will be winding it up and paying the remaining dollar amount back to unitholders,” Morningstar said.
“We suggest those invested here put in their withdrawal requests now, and have consequently downgraded our Morningstar Recommendation from hold to avoid.”
