Lonsec downgrades Metrics funds after Count’s early warning

The non-bank lender had previously pushed back strongly against Count’s move, questioning the basis for the recommendation and highlighting its long-term performance record.

Namely, back in March, Count advised its 550 advisers to sell out of the ASX-listed Metrics Master Income Trust and Metrics Income Opportunities Trust, as well as the unlisted Metrics Direct Income Fund, warning of risks in private credit.

At the time, the decision raised eyebrows, particularly given the high ratings assigned to the funds by Lonsec and claims that Count made the call without meeting with Metrics – something ifa understood to be a standard step in any due diligence process.

Lonsec has now downgraded the Income Opportunities Trust from “recommended” to “investment grade”, and the Master Income Trust from “highly recommended” to “recommended”. The downgrades were first reported by The Australian Financial Review but have been verified by ifa’s sister brand InvestorDaily.

InvestorDaily understands that the unlisted Metrics Direct Income Fund has also been downgraded from “highly recommended” to “recommended“.

Lonsec rates funds as highly recommended, recommended, investment grade, fund watch, redeem, or screened out.

Metrics managing partner Andrew Lockhart had previously criticised Count for making its recommendation without meeting with the firm, noting that repeated invitations from Pinnacle Investment Management to engage have been declined.

“I am disappointed that the position that they have got to is a recommended redeem, and I’m certainly not aware of any reason why that would be an appropriate recommendation for an investor,” Lockhart said at the time.

In a separate statement made to InvestorDaily at the time, a spokesperson for Metrics said: “We’re very proud of the strong performance outcomes we’ve delivered for investors.

“Private credit is growing because the asset class is meeting the needs of a large investment cohort, in particular those seeking an allocation that can provide capital stability, income and portfolio diversification. We strongly believe this growth has a very long way to go.”

ifa understands that Metrics has maintained its high ratings with Zenith.

The developments come as the corporate regulator continues to monitor private credit and private markets more broadly.

Just last month, the corporate watchdog signalled it will not sit on the sidelines as private markets boom, declaring it is “not a passive observer” and will not take a “wait and see” approach.

Concerns about the private credit sector extend beyond Count and ASIC, with SQM Research announcing earlier this year it has placed the private credit sector on watch – meaning it has increased its ongoing monitoring of the sector and has “made adjustments to its ratings scoresheet to place a greater weighting towards governance factors”.

ifa understands its credit sector watch remains in place.

“What is critical going forward is that fund managers in the private credit sector offer full transparency on their respective loan book,” SQM’s managing director Louis Christopher said. “SQM now expects nothing less of our rated managers in the sector”.