Defaqto is launching a new rating system to assess funds and portfolios without an established performance history.
The Defaqto Foundation Rating will provide an independent assessment for funds and portfolios over their first five years, addressing the gap between a fund’s establishment and the development of a mid-long term performance history.
Andy Parsons, head of insight at Defaqto, said: “There is a clear gap in the market when it comes to newer funds and portfolios that don’t yet have an established performance track record.
“The Foundation Rating allows us to look beyond the performance history that simply doesn’t exist at this stage.
“By combining Defaqto’s structured quantitative assessment with RSMR’s qualitative research and due diligence expertise, we can give advisers another independent source of information when they are considering a newer proposition.”
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The system combines an assessment of information provided by the asset manager with a qualitative appraisal from RSMR, drawing on its existing due diligence experience in the asset management sector.
Following these initial assessments, analysts consider factors that support or hinder the future possibilities of a fund or portfolio. These include the experience and stability of the investment team, alongside their investment processes, systems, and controls.
Once a fund or portfolio has been established for a year, its performance history will also be integrated into the analysis. Analysts then provide a simple pass or fail grade.
Stuart Ryan, head of research at RSMR, said: “Investors naturally look for evidence such as track record and scale, but a fund has to attract investment in the first place to reach those milestones.
“What we can do is use our experience and due diligence to assess whether the right foundations are in place, looking at the people behind it, their experience, the investment process and the wider asset management business.”
