Research house scrutiny needed

Fundmonitors.com

November 2025

3-minute read

Originally published by SMS Magazine (Self Managed Super)

An industry stakeholder has suggested the role of research houses needs to be examined more closely in the wake of high-profile product collapses, such as the Shield Master Fund and First Guardian Master Fund offerings.

Research reports and ratings are the first step in the retail distribution chain for fund managers as a report is required for most dealer groups to add a product to their approved product list.

"In the case of Shield and First Guardian, it is clear that no rating should have been issued," FundMonitors chief executive Chris Gosselin indicated.

"The research process is potentially highly conflicted as the fund manager pays the research house for the report. In reality, the fund manager is not so much paying for a research report, they're paying for the rating."

Further, Gosselin noted many in the industry have raised concerns about the current process, which has a lot of fund managers paying up to $35,000 a year per fund for a research report and suggested some could be paying well over $500,000 a year.

"A research report should be unbiased, but if the manager is paying the research house, there's the potential for massive conflicts of interest. That's not to say all research is flawed or that conflicts aren't correctly managed in many cases, but Shield and First Guardian highlight the potential issues," he explained.

He proposed the Australian Securities and Investments Commission (ASIC) should be more involved in holding research houses to account for their activities.

"A research house should have an AFSL (Australian financial services licence) issued by ASIC, but to date there is a relatively light-touch approach from ASIC to ensure the accuracy and independence of their reports, partly because it is generally only distributed to advisers who are AFSL holders and technically because it doesn't contain advice," he said.

In addition, he called for the payment system for research and ratings to be changed.

"Rather than the fund manager paying for the research, the platform or end user should pay. A beneficiary-pays approach would remove the conflict inherent in the system," he proposed.

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Fund manager ratings: Why due diligence is key, even on ratings houses

Fundmonitors.com

November 2025

5-minute read

Originally published by IFA (Independent Financial Adviser)

Fund research and fund ratings are intended to be detailed qualitative assessments used by the key parties in the fund distribution chain - advisers, dealer groups, platforms and trustees. They are primarily an essential tool in the marketing process for fund managers wanting to raise funds under management.

Research reports should provide key technical and compliance information on the fund, and insights into the operational aspects of both the management company and the fund. In addition to covering both the fund's strategy and investment objectives, the research should include in depth due diligence, and verification of the management company, as well as the people behind the fund including their experience, track record, stability, and alignment of interest of the fund's investment team.

It goes without saying there should in-depth investigation of any real or potential conflicts of interest, and verification of any claims made by the manager, as occurs when a company is listed on the ASX.

One of the most important aspects of a research report is the fund's current and past performance history to enable the reader to check that the expectation of return and risk - although never a promise - matches reality. Unfortunately, this is frequently either lacking full clarity and analysis, or is out of date, or is covered by the regular disclaimer line "past performance is no guarantee..."

Above everything else a fund manager's past performance is essential. While every investment will, or should, come with the "past performance" warning, without looking at a fund or manager's track record, what else is there to judge them by?

There are varying thoughts about the ideal length of track record you should look for, and it will vary on asset type and your personal circumstances. Most offer documents will suggest at least five or seven years to ensure you can see across multiple time frames and different market conditions. Although this doesn't guarantee future performance, you will see the manager's track record.

Yet, in Shield's case, the fund still had a rating from SQM Research.

SQM had given Shield and First Guardian a "favourable" 3.75 stars out of 5, before downgrading them shortly before investor withdrawals were frozen. This rating was given despite the funds having no track record, and it transpires significant conflicts of interest, which proper due diligence or verification should have uncovered.

ASIC is going to hold all links in the Shield and First Guardian chain accountable, which highlights that research reports and their ratings can't necessarily be relied upon by advisers, dealer groups, platforms and trustees. As such, they each need to conduct their own research and due diligence.

Which of course begs the question - especially when there's a fund failure - why didn't they?

For the end investor the issue is compounded further by the fact that the report is rarely available to them. Instead, they are just presented with the rating itself or rely on their adviser - which they should be able to do.

There's no guarantee that the rating reflects reality as the rating itself is often taken as gospel, without examining the fund, and without doing their own research, which generally they're not sufficiently equipped to do.

This covers a generic industry issue which is going to impact the good and honest players (the majority) as well as those at fault - the so called "bad actors" who in the financial services sector seem to occur with monotonous regularity.

In this case, as well as there being a structural problem, the investigation to date suggests that bad actors lured potential investors via false comparison websites, who were then called by lead generators and referred to financial advice providers, who in turn advised investors to roll their superannuation assets into Shield or First Guardian.

ASIC is continuing to investigate misconduct relating to the Shield and First Guardian Master Funds to hold those involved to account. However, it is likely that ratings houses are here to stay. If that is the case there needs to be change, and greater transparency, or investors will need to conduct their own due diligence on both the ratings houses and fund managers themselves which of course they are ill equipped to do without the financial knowledge, or the fund's track record to go on.

It may be awkward to ask, who pays for a fund manager rating? Does the research house charge advisers, investors or platforms, or continue to charge the fund manager for the rating or subsequent services?

There is a good argument for changing the current system from the manager paying for the rating, to a process where the investor, adviser or platform pays for it. Apart from the removal of a potential conflict of interest, that would add to the transparency of the ratings process.

However, that risks the situation where the there is no research as no one wants to pay for something they aren't forced to have - even if logic and common sense suggest they should.

Maybe ASIC will legislate a solution. Or maybe the advice and platform industry will decide the cost of accepting research commissioned by the fund manager is not worth the risk.

In the meantime, while the only way for a fund manager to tick the box and pay for a research report and rating, the status quo is likely to continue.

Magellan Global Quarterly Update

Magellan Asset Management

October 2025

(Viewing time: 17 mins)

Head of Global Equities Arvid Streimann and Portfolio Manager Casey McLean provide an update on the Magellan Global Fund, reflecting on a quarter dominated by strong equity market performance and heightened investor focus on AI and semiconductor companies.

Funds operated by this manager:

Magellan Global Fund (Open Class Units) ASX:MGOC , Magellan Infrastructure Fund , Magellan Global Opportunities Fund No.2 , Magellan Infrastructure Fund (Unhedged) , Magellan Global Fund (Hedged) , Magellan Core Infrastructure Fund , Magellan Global Opportunities Fund Active ETF (ASX:OPPT)

Important Information: This material has been delivered to you by Magellan Asset Management Limited ABN 31 120 593 946 AFS Licence No. 304 301 trading as Magellan Investment Partners ('Magellan Investment Partners') and has been prepared for general information purposes only and must not be construed as investment advice or as an investment recommendation.  This material does not take into account your investment objectives, financial situation or particular needs. This material does not constitute an offer or inducement to engage in an investment activity nor does it form part of any offer documentation, offer or invitation to purchase, sell or subscribe for interests in any type of investment product or service. You should obtain and consider the relevant Product Disclosure Statement ('PDS') and Target Market Determination ('TMD') and consider obtaining professional investment advice tailored to your specific circumstances before making a decision about whether to acquire, or continue to hold, the relevant financial product. A copy of the relevant PDS and TMD relating to a Magellan Investment Partners financial product may be obtained by calling +61 2 9235 4888 or by visiting www.magellaninvestmentpartners.com

Past performance is not necessarily indicative of future results and no person guarantees the future performance of any financial product or service, the amount or timing of any return from it, that asset allocations will be met, that it will be able to implement its investment strategy or that its investment objectives will be achieved. This material may contain 'forward-looking statements'. Actual events or results or the actual performance of a Magellan Investment Partners financial product or service may differ materially from those reflected or contemplated in such forward-looking statements.

This material may include data, research and other information from third party sources. No guarantee is made that such information is accurate, complete or timely and no warranty is given regarding results obtained from its use. This information is subject to change at any time and no person has any responsibility to update any of the information provided in this material.  Statements contained in this material that are not historical facts are based on current expectations, estimates, projections, opinions and beliefs of Magellan Investment Partners or the third party responsible for making those statements (as relevant). Such statements involve known and unknown risks, uncertainties and other factors, and undue reliance should not be placed thereon. No representation or warranty is made with respect to the accuracy or completeness of any of the information contained in this material. Magellan Investment Partners will not be responsible or liable for any losses arising from your use or reliance upon any part of the information contained in this material.

Any third-party trademarks contained herein are the property of their respective owners and Magellan Investment Partners claims no ownership in, nor any affiliation with, such trademarks.   Any third-party trademarks contained herein are the property of their respective owners, are used for information purposes and only to identify the company names or brands of their respective owners, and no affiliation, sponsorship or endorsement should be inferred from such use. This material and the information contained within it may not be reproduced, or disclosed, in whole or in part, without the prior written consent of Magellan Investment Partners. (080825-#W17)

Chris Gosselin, CEO of FundMonitors.com, speaks with Simone Haslinger, Chief Executive Officer at East Coast Capital Management.

Simone shares how clear, sustained trends across commodities, precious metals, and tech equities powered a standout quarter for East Coast Capital, emphasizing the strength of their fully systematic, data-driven strategy that thrives on market momentum and delivers steady, uncorrelated returns.

Funds operated by this manager: ECCM Systematic Trend Fund

Expert analysis on what the RBA will do next Tuesday, November 4

FundMonitors.com

31 October 2025

Chris Gosselin, CEO of FundMonitors.com, speaks with Nicholas Chaplin, Director and Portfolio Manager at Seed Funds Management, and Renny Ellis, Director & Head of Portfolio Management at Arculus Funds Management.

In this insightful discussion, the trio unpack the latest Australian inflation figures for the September quarter and consider what they might mean for interest rates, economic momentum, and investor sentiment heading into 2025. With the Reserve Bank's next move under close scrutiny, the conversation explores the data behind the numbers -- and what could lie ahead for markets and monetary policy.