Funds announced with five FE Crowns
FE, the funds data provider, has announced 191 funds obtained the highest five FE Crowns rating following adjustment to the ratings methodology – previously the highest rating was three FE Crowns.
The funds achieved the top rating based on criteria including alpha generation, consistent performance and low volatility.
The previous Crown ratings were based on sector comparisons rather than benchmarks, which made it difficult to compare funds in areas such as the UK Investment Management Association’s (IMA) Specialist sector.
the new methodology allocates the most appropriate benchmark for each fund, instead of scoring all funds against their sector’s average returns as before. As a result of being compared to a more closely correlated benchmark, the UBS Long Dated Corporate Bond Plus Fund saw its rating improve from one to five FE Crowns, while SWIP European Real Estate and Threadneedle European Bond were upgraded from one to four FE Crowns.
Similarly, funds in small sectors such as the IMA China/Greater China and Technology & Telecoms were not rated because their sectors did not contain enough funds to produce a reasonable sector average. First State Greater China Growth and GLG Technology Equity, both newly eligible for ratings, have received five and four FE Crowns, respectively.
Of the 31 funds to reach their three-year anniversary during the last quarter thus becoming eligible for a rating (scores are calculated from three-year total returns), five attained five FE Crowns: Aviva Investors High Yield, Royal London Sterling Credit, CF Perseus, EFA Close Strategic Alpha and Prime US Dollar Liquidity.
Based on three-year total returns, funds are scored according to alpha generation, volatility versus their benchmark and the consistency with which they have beaten their benchmark. Funds are grouped into 10 sub asset classes and within these groupings, the top 10% receive five FE Crowns, the next 15% gain four FE Crowns and then the remaining 75% of funds are equally split between three, two and one FE Crowns.
Michael Holland, managing director at FE, said: “In the old methodology, smaller and more obscure sectors produced less meaningful ratings from comparisons being made between hugely different funds within the same sector. Our new way of comparing each fund with the benchmark which best fits its performance allows for a much more accurate rating, the end goal of all such systems.”