Inchoosing which managers took poll positions in the Fund Manager of the Year (FMOTY) awards this year,Assirtemployed the same process it has used in the past — combing its database of managed funds to discover managers worthy of special mention.
The Assirt Fund Rating complements the company’s quantitative analysis and plays an important role in selecting the winners.
In building the algorithm to conduct the award analysis, care was taken to ensure an appropriate mix between the various elements that make up the awards. In each of the categories, Assirt examined products from the three main tax structures: unit trusts, allocated pensions, and superannuation.
For a manager to be considered in an award asset class it had to have at least one product rated by Assirt in that asset class.
Once a manager was considered eligible for an asset class, all its relevant products were considered in the analysis, provided they had a three-year performance history and, for non-rated products, a minimum fund size of $10 million. Both retail and wholesale products were included.
For each manager in each asset class, Assirt looked at three factors — the average Assirt Fund Rating, one-year performance and a three-year information ratio.
One-year performance reflected the annual nature of the award. A three-year information ratio recognised risk adjusted returns over a period that reflected the investors’ minimum likely term of investment.
The Assirt Fund Rating incorporates the qualitative, forward-looking assessment of the manager.
The one-year return and information ratio figures for each manager are based on a size-weighted average of the eligible funds for that manager in each respective category. Weighting the performance factors by fund size ensures manager effort is concentrated where its clients’ money is placed.
The output from the analysis was a single number, ranking each manager in each asset class.
To discover the overall Fund Manager of the Year, points were awarded to the first five placegetters in each asset class.
Increased weighting was given to the multi-sector, Australian and international share categories, which together account for 70 per cent of retail investments. The overall winner was required to place well in a number of asset categories.
To reflect some of the key changes sweeping across the funds management industry, this year’s awards introduced two new categories — the ‘Rising Stars’ and ‘Alternative Assets’ awards.
The Rising Stars category rewards emerging, less established managers, while the Alternative Assets category recognises managers that employ alternative or hedge fund strategies. Both these categories are attracting growing interest from investors and advisers and the awards have been designed to recognise managers that have been successful in these areas of the market.
Steve Gamarov is head of investment solutions andquantitative research at Assirt.
