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Wilshire Associates Enhances Manager Research Scoring Model

Introduces Dynamic Weighting Component

Wilshire Associates Incorporated (Wilshire®), a diversified global financial services firm, today announced enhancements to its manager research scoring model designed to improve both the flexibility and interpretation of its research scores, increasing their value to clients in selecting and monitoring investment strategies.

Wilshire’s scoring model includes six qualitative components to which the firm’s manager research professionals assign numerical scores when rating investment strategies. The enhancements that have been added to Wilshire’s standard scoring model encompass the following three areas of methodology change:

  • The separation of its current “Organization” component score into two distinct component scores for “Firm” and “Team.” This expands the model from six to seven component factors, though the “Firm” and “Team” components will continue to roll up into an aggregated “Organization” score; and
  • A shift from static weighting of model components to dynamic weighting, where significant deterioration in specific component scores will dynamically impact their relative weight in the overall score.

“We believe that one of the primary advantages that will be realized by incorporating the changes is a more intuitive interpretation of the scores given to investment strategies,” noted Julia K. Bonafede, president, Wilshire Consulting, the institutional investment advisory and outsourced-CIO business unit of Wilshire. “Additionally, the changes provide for greater clarity to support the ‘Organization” score with the separation of distinct ‘Firm’ and ‘Team’ components by removing some confusion that occasionally occurs when comparing product scores across strategies run by the same investment management organization,” she added.

“While our current ‘Organization’ scores encompass aspects of a firm that would impact all strategies run by the same firm, there are elements of the score that depend on idiosyncratic characteristics of the individuals involved in managing a particular strategy. By separating and displaying underlying scores for ‘Firm’ and ‘Team,’ we are better able to provide intuition to these differences,” she stated.

“The changes also deliver a ‘circuit breaker’ effect for critical components that receive below-median scores. The dynamic weighting methodology calls for systematically increasing the relative weights to our ‘Organization’ and ‘Forecasting’ components as our research scores to these components fall below median,” Bonafede said. “We apply this circuit breaker notion to the ‘Organization’ and ‘Forecasting’ components because we view material erosions to these components to be significant to the point where strengths in other aspects of the investment process are incapable of offsetting weaknesses in these critical areas.”