Our Qualitative Fund Ratings
Research IP provides qualitative fund manager research on a range of funds. Currently covering over 70 funds in the New Zealand market and a number in Australia.
What makes us different?
The Research IP rating is a forward looking tool that shows the degree of confidence Research IP has that a manager can achieve the fund’s stated objective. The higher the score, the greater confidence Research IP has in the manager’s
ability to achieve the Funds stated objective, over a full market cycle (i.e. seven plus years). An investor should not view this score as being reflective of short term, i.e. less than three year performance. Research IP does not
warrant a manager’s or fund’s performance.
The qualitative rating of a fund is a function of the Research IP Factor Weighting process, which is built around the six qualitative research categories:
1. Corporate & Investment Governance
e.g. alignment with parent company (if applicable), tax structures, strength of finance structure and capital funding, management and portfolio manager performance incentives and fee structures, competitors, and resourcing support.
2. Investment Philosophy & Process
e.g. investment beliefs, consideration of environmental, social and governance (ESG) factors, research methods and tools, targets and goals within portfolio management, tactical and strategic asset allocation, and external manager selection, monitoring and engagement.
3. People
e.g. capability and stability of the team, experience of portfolio managers, what they are responsible for and who makes the decisions, composition of independent directors, trustee reports, level of disclosure, mandates, frequency of compliance meetings and details relating to the Investment Committee.
4. Portfolio Construction & Implementation
e.g. consistency with the philosophy, underlying factors, construction process, asset allocation, ESG, appropriateness of benchmark, tracking errors and transaction costs.
5. Risk Management
e.g. tools and resources, systems and controls, quality and consistency of decision-making framework, capacity constraints, and portfolio risk controls.
6. Investment Fees
Fees are assessed on a relative basis in line with the relevant peer group of the fund. Research IP consider the fees holistically at the product level.
Need help with the investment jargon?
This results in a score out of 5, which translates to our IP rating.
The IP Rating
5 IP’s
The fund exhibits superior confidence of achieving the fund’s stated objective. This recognises aspects about the Manager and Fund in question that includes, but is not limited to, significantly experienced and stable senior personnel, a sound track record over a full market cycle, a clearly defined investment philosophy and process and a portfolio consistent with that philosophy and process. The management company will also have established effective controls to maintain that philosophy.
4 IP’s
The fund exhibits strong confidence of achieving the fund’s stated objective. This recognises aspects about the Manager and Fund in question that includes, but is not limited to, experienced and stable personnel, a sound track record over a full market cycle, a clearly defined investment philosophy and process and a portfolio consistent with that philosophy and process. The management philosophy must be coherent and consistent with existing portfolios and processes.
3 IP’s
The fund exhibits average confidence of achieving the fund’s stated objective. This recognises aspects about the Manager and Fund in question that includes, but is not limited to, experienced personnel, a sound track record, a defined investment philosophy and process and a portfolio consistent with that philosophy and process.
2 IP’s
There is weakness in the Manager and it is unlikely to meet fund’s stated objective, this could be brought about by material change with the manager, this may include, but is not limited to, departures, new hires, process changes, changes to the investment philosophy. Investors should consider alternative funds that are considered to have the ability to achieve their stated objectives over the long term.
1 IP
There is significant weakness in the Manager and it is unlikely to meet fund’s stated objective, this could be brought about by material change with the manager, this may include, but is not limited to, departures, new hires, process changes, changes to the investment philosophy. Investors should consider alternative funds that are considered to have the ability to achieve their stated objectives over the long term.
SELL
This category covers previously recommended funds that are no longer recommended because of some material change. Removal from recommended status might be for a variety of reasons such as a fundamental change in the fund management company or in the manager’s investment strategy, or because a fund did not meet its original expectations.
Rating Withdrawn
This category covers previously recommended funds that have experienced a material change. Removal from recommended status might be permanent, or temporary while Research IP assesses the impact on the ongoing ability to meet the fund’s stated objective.
Want to know more? Request a copy of the Research IP Qualitative Research Methodology.
Please don’t hesitate to get in touch.
It is about you, it is your money, it is your choice. Be informed to sleep well with your choices.
