Time runs out for tardy researchers

Australia’s major retail funds management ratings houses need to improve their turnaround times, according to the findings of Money Management’s 2010 Rate the Raters survey.

The survey, which saw fund managers rank research houses individually across a number of categories, showed that while firms were doing reasonably well, improvements could be made to better satisfy the demands of fund managers.

The fund manager respondents were asked to rank the six major research houses out of five possible ratings of ‘excellent’, ‘good’, ‘average’, ‘below average’ and ‘poor’ for the turnaround time each research house delivered when interacting with each fund manager.

The highest ‘excellent’ ranking of 14 per cent was attained by Lonsec, followed by 11 per cent for Zenith and 6 per cent for Morningstar. Mercer, Standard & Poor’s and van Eyk all failed to attain an ‘excellent’ score in this category while all the research houses, with the exception of Lonsec, received votes in the ‘below average’ and ‘poor’ category.

Van Eyk fared worst with 55 per cent of respondents voting its turnaround time ‘below average’ (22 per cent) or ‘poor’ (33 per cent). Morningstar, S&P and Zenith received 19 per cent, 14 per cent and 5 per cent respectively in the ‘poor’ category.

Commenting on the findings, Mark Thomas, chief executive at van Eyk, said the firm’s assessment process required intensive global site visits, often across more than one country, and added that the research house’s decision to expand its coverage to include New Zealand required extensive development work, which also took up a great deal of analysts’ time.

“Van Eyk’s sector review cycle is 18 months to two years, with the largest reviews on a shorter cycle. While timelines are important, we also organise our review schedule to make sure that it is relevant to the strategic asset allocation that we recommend. In the last year we have also expanded our coverage to the New Zealand market. This involved two analysts conducting three trips to rate some 50 strategies in that market. Obviously in future years these reviews will require less development work and should be turned around at a faster rate,” he said.

Below average scores were also given to a number of research houses for transparency of ratings, the feedback received by fund managers, and the quality and experience of personnel.

The aim of the Rate the Raters survey was to garner fund manager opinion on how research houses were faring as opposed to establishing an overall winner.

Money Management is now extending the survey to determine how financial planning dealer groups rate the ratings houses and the results from the two survey segments will then be analysed to deliver the industry a holistic view of the sector.