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.

Hedge Clippings | 07 November 2025

The RBA's Balancing Act -- Up, Down, or Just Stuck?

The RBA did exactly what everyone expected this week -- nothing. Rates stay put at 3.6 per cent, and for now that seems the safest course. But between the lines of Governor Michelle Bullock's press conference and the latest forecasts, the more interesting question isn't what the RBA did, but what it might do next.

Depending on your perspective, that next move could just as easily be up as down.

For one, inflation is refusing to behave. After more than a year of steady declines, the September quarter showed prices ticking higher again -- both in the annual headline number of +3.2%, and in the trimmed mean, which the RBA watches most closely, of 1% for the September quarter, and 3% for the past 12 months. At 3 per cent annualised, underlying inflation is moving in the wrong direction, and the RBA now doesn't expect it to fall back to its 2.5 per cent target midpoint until June 2027.

That's a long time to be patient.

Add to that a housing market that's rising again, consumers who appear to be rediscovering their wallets, and a labour market that's still "a little tight", and you've got the ingredients for inflation to stick around longer than anyone wants.

Bullock herself made the point that monetary policy is "a little restrictive", but not much more than that. Credit is flowing freely, private demand is lifting, and the early effects of rate cuts earlier in the year are still working their way through. If inflation does prove stubborn, the argument for a nudge back up in rates will be hard to ignore -- especially if the RBA wants to protect its hard-won credibility.

Then again, the RBA knows the economy is fragile. Unemployment has crept up to 4.5 per cent, job growth is slowing, and productivity -- the missing ingredient in every optimistic forecast -- remains weak. Wages growth has already eased from its peak, suggesting inflationary pressure from the labour market may be topping out.

Add in a backdrop of global uncertainty, slowing trade, and the lingering drag of higher household debt servicing costs, puts the case for staying put -- or even easing -- but only once the data shows inflation back on a downward path. The release of reliable monthly CPI numbers (in other words, based on full data) for October, due out on November 25, will provide a clearer and a more up to date picture.

Bullock's message was cautious rather than hawkish: the Board will watch the data and reassess each month. And the RBA's own central forecast still assumes the next technical move will be a rate cut -- albeit not until well into 2026.

So, which way does the wind blow? For now, it's a stalemate. Inflation's too high to cut, but growth's too soft to hike. The RBA will no doubt sit tight in December, talking tough but acting cautiously, while hoping those "temporary factors" in the September CPI really do prove temporary.

If inflation edges higher again in the months to come, the probability of a hike rises -- perhaps not by much, but enough to keep markets nervous. Conversely, if inflation steadies and the labour market continues to ease, rate cuts will creep back onto the horizon by mid-late next year.

The RBA's next move could still go either way. But for households, businesses, and markets, the message is the same: don't expect relief soon, and don't rule out another bump if inflation refuses to play ball.

In other words, rates might not be going up, but they're certainly not going anywhere fast.

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Fund manager ratings: Why due diligence is key, even on ratings houses | Fundmonitors.com

Magellan Global Quarterly Update | Magellan Asset Management

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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)

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