How are the Awards decided?
The overall title is decided on a qualitative process based on FundSource's investment manager research philosophy.
FundSource believe that there are four primary factors, which comprise the essence of a funds management organisation. These four factors are encapsulated in the common acronym known as the 4 P's, represented by the following elements: People, Process, Portfolio and Performance.
PEOPLE
It is FundSource's belief that the foundations of any organisation are its People and as such the future quality and success of that organisation is dependent upon the skills, knowledge and capability of its personnel. This applies not only to senior management and those vested with decision-making responsibility, but also to all parts of the organisation.
PROCESS
When FundSource analyse the Process factor it is looking at features such as the strength and appropriateness of the decision making structure, the perceived level of decision making effectiveness, the investment philosophy and approach to investment management, the type of investment culture engendered by the process, the depth and extent of research and how it affects the buy and sell decision, the quality of inputs into the decision making process, the degree and extent of internal interaction and communications, the clarity of the investment strategy, the perceived level of discipline and consistency within the process, the sufficiency of internal controls and the flexibility of the process. As in the case of assessing the People factor, judgement on the Process factor is also a qualitative task requiring extensive knowledge about organisational structure and the applied investment management process.
PORTFOLIO
At a Portfolio level FundSource seek to understand the basis on which portfolios are constructed and managed. This entails combining investment process factors such as identifying the investment style and philosophy with the set of constraints, which have been overlayed on the portfolio. For example, FundSource are looking at the appropriateness of the risk/return profile of each portfolio, a clear understanding of the objectives or benchmarks against which its performance will be measured, the level of tracking error (if any) that is targeted, the degree of turnover to be expected and the level of concentration to be found in the portfolio's holdings.
PERFORMANCE
Finally, FundSource examine the Performance of a portfolio in a number of different ways to see how it has done on a historic basis and to determine whether there is any information contained in that performance which may point to performance in the future.
To assist in this area FundSource look at discrete and cumulative performance versus benchmark indexes and versus peers over varying periods of time. FundSource also look at the risk-adjusted performance of the portfolio to ensure that we are measuring different funds on an equivalent basis and we look to see how consistent performance has been over time.
The nine sectors are decided on a quantitative process, based on FundSource's star rating system
The New Zealand funds management industry has over 450 open-end funds covering a wide diversity of investment portfolio types of objectives delivered under several legal structures. FundSource's fund sector award research process groups these available funds into their relevant investment sector categories.
FundSource then apply a range of screens (detailed below) to each grouping to generate a nominee list from which the eventual fund sector winner is selected. This is done on the basis of historic risk adjusted returns. Under this quantitative process, all retail NZ based fund managers and their funds are considered for fund sector nominations and awards.
The analysis screens used to select nominees were processed based on information as at 1 May 1999.
To pass the screens a fund must have had;
- NZ residency status, open for new investment
- Active Management
- Minimum 3 years of performance history
- Key person retention of minimum 2 years
- General availability to the public (not a private fund)
- No cost to the investor outside those costs which impact on fund performance.
- No potentially high upfront costs
- No lock-in period above 1 year
- Minimum initial investment sum not above $5000
- Reasonable fund mandate consistency
- Minimum fund size $10m or above
- 4 or 5 star FundSource Fund Rating within the last 6 months
Each fund sector's nomination and award is accompanied by the naming of a fund which passed the Awards process.
All of the above screens are embedded within FundSource's normal fund research process, several of these forming key hurdles required by a fund to attain FundSource's 'Recommended' or better qualitative fund rating.
