S&P Capital IQ launches grading of passive funds

S&P Capital IQ Fund Research has launched a grading methodology to treat passive funds as a separate asset class, and which will award Platinum, Gold or Silver gradings on ETFs and index tracker funds.

The funds research business said it believes growth of low cost passive strategies in Europe will increase, as more wealth managers and financial advisers include them in client portfolios. Regulatory changes in 2013 are likely to also accelerate use of passive strategies.

The methodology will compare passive funds using historic tracking errors, charges, and the culture and experience of the teams managing the funds.

It will focus on how groups try to add return to offset fees and expenses, and will assess inherent operational risks. The attributes of the underlying indices will also be considered, including liquidity and replicability.

Kate Hollis (pictured), director Fund Research at S&P Capital IQ said: “We are seeing a massive upsurge of interest in passive funds. Low cost beta propositions, with low or no management fees are becoming a reality.”

“Investors continue to seek greater confidence and transparency in their investments. We are therefore delighted to offer this new grading service that will provide best in-class knowledge for portfolio selection.”


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