Based solely on objective, quantitative criteria, winners of the fund industry's premier awards are recognized for exceptional outperformance on a risk-adjusted basis relative to their peers. The achievements of this year's winners are noteworthy, given 2019's late-cycle environment where funds typically underperformed.
How can investors verify that a fund has consistently outperformed its rivals? In an industry saturated with accolades, how can they ensure that an award-winning fund is truly worth a prize, and that it has been assessed solely on quantitative performance data?
The Refinitiv Lipper Fund Awards are unique, being the industry's only awards program that is based entirely on objective, quantitative criteria, recognizing exceptional outperformance on a risk-adjusted basis relative to a fund's peers. There is no bias, and no nomination process. Each award is entirely data-derived.
In their 31st year, the awards recognize funds from across the industry spectrum, comprising mutual funds, hedge funds, insurance and pensions funds, closed-end funds and exchange-traded funds (ETFs) — from across all asset classes including equities, bonds, commodities, money market, mixed-asset, real estate and alternatives.
To be eligible, funds must demonstrate a minimum of three years' worth of performance history, and be registered for sale in one of 17 countries and territories, including the United Kingdom. By establishing classifications pertaining to a mix of fund type, asset class, country, currency, term and more, investors are able to make like-for-like comparisons between funds that share characteristics — an exercise that is critical during the fund selection process.
Exceeding in a year of underperformance
The 2020 edition of the awards are noteworthy. Widespread fund underperformance underscores how this year's winners are truly worthy of their award.
During 2019, the United Kingdom experienced a slowing late-cycle environment, where GDP fell from 2 percent in Q1 to -0.1 in Q2 — followed by a rise to 1.2 percent in Q3, and dropping again to 1.1 percent in Q4[i]. The FTSE 100 was equally as volatile, but ended in positive territory[ii].
Driving this volatility was uncertainty surrounding Brexit, political gridlock and the subsequent general election, sterling volatility that significantly impacted large-cap companies, and an increasingly complex regulatory environment for the financial services industry. As a result, active funds typically underperformed their passive peers during the year.
It wasn't all bad, however. In general, the UK economy was in good health, but there were issues with commercial property funds caused by ongoing disruption to the high street from e-commerce and online services. Top-performing funds not only mitigated the above headwinds, they excelled where others were challenged. Excellent stock picking with conviction, ideas and concentrated portfolios enabled award-winning managers to identify companies that were immune the above. United Kingdom equity funds particularly stood out.
At the macro level, the markets were equally as mixed. In the United States, low interest rates, strong economic growth, controlled inflation, robust employment and healthy corporate earnings saw the market grow by 30 percent[iii] during the year. Despite a strong dollar, foreign appetite for United States assets continued largely unabated, as overseas investors fled uncertainties such as Brexit and a slowing global economy[iv]. Low and negative interest rate environments across Europe and Asia also prompted investors to turn their attention westward. Like those of the United Kingdom, United States equity funds performed well.
Across 500 fund classifications and using proprietary methodology, the Refinitiv Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over three, five and 10 years respectively. The fund with the highest Lipper Leader for Consistent Return value in each eligible classification wins the Refinitiv Lipper Fund Award.
Complementing the individual fund awards are the group awards: Managers with a minimum of five equity funds, five bond funds or three mixed-asset funds respectively are eligible for the large fund family group awards; to qualify for the small fund family group award, managers must have at least three distinct funds in either equities, bonds or mixed-asset. Across each of the six fund family groups, the lowest average decile rank of the three years' Consistent Return measure determines the asset class group award winner. In cases of identical results, the lower average percentile rank will determine the winner.
In addition, an overall group award will be given to both the best large group and best small group: Large fund family groups with at least five equity, five bond and three mixed-asset funds are eligible for the overall large group award; and small fund family groups with a minimum of three equity, three bond and three mixed-asset funds qualify for the overall small group award. In both instances, the lowest average decile rank of the three years' Consistent Return measure determines the asset class group award winner. A minimum of three competing companies are required for the group awards to proceed.
Winning funds over three years within the 20 largest classifications per award universe, according to assets under management, will be awarded a trophy. All winning groups will also be presented with a trophy.
This year's winners and award ceremony
The 2020 Refinitiv Lipper Fund Awards for the United Kingdom will be announced on 19th March 2020. The award ceremony will be held at Banking Hall, London. The prestigious event will be attended by industry leaders, visionaries and influencers whose views and insights are shaping the fund industry domestically and internationally. There are limited seats available, so register here to secure yours!
The Refinitiv Lipper Fund Awards are part of Refinitiv, one of the world's largest providers of financial markets data and infrastructure. The company delivers critical news, information and analytics — including Lipper's 47-year-old repository of robust, independent fund insights and benchmarks — as well as trading, open data and technology platforms that connect traders, investors, financiers and corporate professionals to opportunities globally.
For more information visit Refinitiv.com
[iii] Robert Jenkins, Refinitiv