Investment manager GMO has lost two of its most senior portfolio managers leading to a ratings downgrade.
Investment manager GMO has lost its head of equities Max Cappetta and head of equities research Anthony Corr.
The firm announced Capetta and Corr's departure last Monday, which led to an immediate downgrade from research house Morningstar from recommended to investment grade.
"They're a big loss to the firm, and while GMO has sizeable resources, alongside a robust quantitative approach, we no longer consider this small cap Australian equities offering as compelling as it once was," the funds rating agency said.
Portfolio manager Olivia Engel has taken on interim responsibility for all domestic portfolios until replacements are hired.
The firm has also drafted in one of its London-based specialists to steady the ship.
Kenneth Brackenridge will arrive in Australia in mid-September as short-term cover.
Co-head of asset allocation Jack Gray will also assume extra responsibilities until replacements are found.
Morningstar said it remained comfortable about the strategy's short-term prospects, but had concerns about the firm losing such senior staff.
"Our main concern is that Cappetta and Corr were 10-year veterans of the house, and that while stock picking may well be black box dependent, senior staff members are still critical in the construction and maintenance of the models, and all their knowledge and experience has now walked out the door with them," the firm said.
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