Some 100-110 funds have been rated and are up on the firm’s website, with the majority of the rated funds in the UK and European sectors.
The rating service aims to find ‘elite’ funds that show a consistent track record of outperforming the market. Unlike other rating services with multiple categories there is only one rating marking the fund as elite.
In order for the fund to be considered for a rating, Darius McDermott, managing director at Chelsea Financial Services, explains it must have a 60% probability of producing alpha. But, he points out, just because it meets the minimum requirement, doesn't mean it will be rated by the service.
“The 3,000 funds out there are too many to rate. We are looking for consistent, alpha-generated performance. We aim to predict those managers who will provide alpha repeatedly and seek out those managers who are most likely to deliver a good performance over the medium to long term.”
“We have a lot of faith in the model but this is just the start,” he added.
The service aims to rate around 10% of funds in each sector. Most of the rated funds up until the launch are in the UK and European sector. The sectors next in line are the bond, property and mixed multi-asset sectors. In the multi-asset range, funds such as the Jupiter Merlin funds, the Casenov / Schroder Diversity funds and the Investec Cautious Managed funds have been rated.
“The data in the service shows that the average time that a manager holds a stock is seven months. It’s become much more short-term. Similarly the same can be said for consumers and the time they hold a fund in their portfolio,” McDermott said.
He added that often managers are quizzed on their three month performance, which is not enough to demonstrate the performance of their funds.
“We are using longer sets of data. Our rating works with three years of data but better with data from a five and ten year period. It could happen, but it’s unlikely that a manager would lose his or her rating in a 12 year period if they stay with the same fund.”
FundCalibre, a joint-venture between Chelsea Financial Services and Albarmarle Street Partners, will use a combination of quant screening, via a specially-designed system named AlphaQuest, and qualitative research to award deserving funds an ‘elite’ rating.
