Lonsec wins favour with fundies
Lonsec has yet again come out on top in Money Management's 2012 Rate the Raters survey, but other researchers have been closing in on the firm over the past 12 months.
The first part of the Rate the Raters survey looks at sentiment coming from fund managers towards the six - soon to be five - major research firms who rate their products.
Despite holding a significantly smaller share of the market, Zenith Investment Partners received stellar ratings from fund managers, particularly in areas such as research methodology, transparency and feedback.
Other research houses - such as Morningstar and van Eyk Research - have slightly improved since last year, but have also received polarised results, which they mostly attribute to their subscription-based remuneration model and accountability to dealer-group clients, rather than fund managers they rate.
In fact, the remuneration model war in the research sector is still raging, with some claiming Australia is one of the few markets where the 'pay-for-ratings' model was still viewed as acceptable.
Co-head of research for Morningstar Tim Murphy said this was also the reason why Australia remains one of the most researched markets in the world.
"Because for whatever reason the Australian market still views paid-for research as being acceptable, there will be more firms that will put their hand up to do [research]," he said.
However, in a recent interview with Money Management, Zenith's John Nicoll said if the pay-for-ratings model is removed by the regulator, the quality of fund reviews could fall dramatically.
He claimed that research that would be available in the market would be simpler and quantitatively skewed.
The Australian Securities and Investments Commission has been reviewing the potential conflicts of interest apparent in some of the financial arrangements between fund managers and research houses, but is yet to make its decision public.
Focus on research transparency and methodology in this year's survey also comes amid changes implemented by almost all major firms in funds research, which could change the results in the coming years.
van Eyk has revamped its strategy in a bid to combat market challenges, which will see the company focus on the alternatives sector, potentially dropping up to 60 names off its current ratings list.
Morningstar changed its analyst ratings scale model in January this year, which resulted in some funds, which were previously 'recommended', receiving silver or bronze labels.
Lonsec's Amanda Gillespie said the researcher is increasing its focus on more strategic guidance and communication with subscribers.
"This is in terms of how to use products, giving them more basis for the discussions they have with their clients, and I guess it kind of comes back to that shift to a more strategy-focused advice model," Gillespie said.
Furthermore, Standard & Poor's recently announced it would no longer be conducting funds research and local wealth management services in Australia as of 1 October this year.
However, the impact of these changes is likely to be seen in the second part of the Rate the Raters survey (which gauges dealer group sentiment), to be published later this year.
AUTHOR
Staff Writer
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