Distribution Technology has launched a new fund rating classification scheme for advisers.
The ACE - which stands for asset, consistency and efficiency - fund rating scheme is the latest change to Dynamic Planner, the Reading-based company’s digital risk profiling and financial planning service.
It rates funds from 1 ACE to 4 ACE, considering the consistency and efficiency of a fund over three and five-year time periods.
For the former, DT looks at the frequency of outperformance and the tracking error, while for the latter, it examines the fund’s performance history and volatility.
Chris Fleming, director of asset and risk modelling at DT, said: “Our initial screens and quantitative engagement process have identified from a universe of around 2,000 funds, just over 250 which have been ACE rated, representing approximately a 12 per cent success rate.
“We have awarded 25 single asset and 22 multi-asset funds the highest 4 ACE rating, representing excellence for both consistency and efficiency over the last five years.”
|Criteria for each of the ACE ratings for single and conventional multi-asset funds|
|4 ACE||Consistency with the Dynamic Planner Asset and Risk Model plus performance efficiency are excellent over five years|
|3 ACE||Consistency with the Dynamic Planner Asset and Risk Model plus performance efficiency are very good over five years|
|2 ACE||Consistency with the Dynamic Planner Asset and Risk Model plus performance efficiency are very good over three years|
|1 ACE||Consistency with the Dynamic Planner Asset and Risk Model is low but performance efficiency is excellent over five years|
The research initially considers the Investment Association listed OEIC/unit trust fund universe and screens for single and multi-asset solutions which are positioned for retail investors.
Once the fund universe has been screened, a uniform quantitative scoring matrix is applied across the identified peer group.
The company with the highest number of ACE-rated funds was Columbia Threadneedle, which had 12.
Alastair Caw, head of UK wholesale distribution at Columbia Threadneedle Investments, commented that the ACE ratings follow a robust quantitative process and will be a very useful addition to the Dynamic Planner tool for financial planners.
“It has identified our ability to deliver consistent, strong, risk adjusted returns to our clients over time and we are delighted that so many of our funds have been rated highly by DT’s new ACE rating scheme.”
Trystan Lewis, a chartered financial planner with Cheshire-based Griffin Wealth Management, said: “Anything over a five year period is a good indicator of consistent performance, which I believe is useful.”