12 January 2006
This week Financial Express unveils its brand new Crown Ratings service for funds. The ratings will appeal to advisers who need an up-to-date quantitative fund rating system to use alongside other forms of rating such as qualitative ratings, and ratings of managers.
Developed in consultation with the UK investment industry, the new Crown Ratings cover UK authorised unit trusts and open-ended investment companies (OEICs), offshore funds, life funds and pension funds.
They are based on quantitative historical performance measures, and funds are rated within the relevant peer groups/sectors. The lowest rated funds in a sector carry a single crown, the highest are awarded three crowns.* [*A full methodology of the Crown Ratings system is available upon request.]
Financial Express Crown Ratings are designed to be an up-to-date successor of existing quantitative ratings. The methodology uses three key measurements of a fund’s performance:
. alpha, the measure of the fund’s returns against its benchmark
. volatility, which measures the degree of volatility and risk
. and consistency, which tracks the degree to which a fund’s performance has been achieved consistently over time.
Furthermore, the volatility and alpha measures are progressively weighted towards the present, in line with other risk scoring systems. For example, funds that achieved most of their good performance in a short burst some while ago, will not necessarily get a good Crown Fund Rating.
The Crown Ratings will shortly be adopted by Skandia as an integral part of their fund analysis material.
The ratings will first be used in Skandia's adviser and customer fund performance literature.
Trustnet Adviser users can view the Crown Ratings alongside Forsyth-OBSR qualitative fund ratings, as part of a new, free, fund ratings tool. The ratings are also available within Financial Express Analytics, a specialist fund analysis package used by advisers and financial institutions.
Michael Holland, managing director for Financial Express says: “There have been some rumblings about existing quantitative ratings systems. We have tried to provide a natural successor which offers up-to-date methodologies, but which does not impose an abrupt u-turn for users of existing systems.”