The back markers will get ‘neutral’ and ‘negative’ ratings, the later a bundle of the two previous negative views into a single rating. OBSR is flexing itself to get involved in the action too with its AAA rating to directly map to the new gold rating, the AA to silver, and A to bronze.
Will this actually make a difference to investors, or is it simply a marketing exercise? Certainly, the medals will not be given out lightly – Morningstar says its framework considers “people, process, parent, performance and price” with each area evaluated thoroughly before it comes up with a final rating.
RDR considerations
For professional fund pickers, it is hard to see how things will change, especially in terms of the pool of funds they will choose from. With RDR implementation just one year a way, the FSA is encouraging firms to be more transparent in the way they choose between different investments, and more complex processes will have to be adhered to.
However, it is still worrying how a majority of funds purchased still belong to the minority of fund houses. According to latest research from Towers Watson, the top 20 fund groups by size accounted for 40% plus market share of the investment landscape. This share has grown over the past decade, while many smaller groups are losing ground. It does not equate that the larger the fund group, the better its funds, but it does inevitably mean a greater marketing budget.
Under pressure
Andrew Smith, head of equity at Momentum Global Investment Management sees a situation where small under-resourced advisory firms may be under more pressure to pick from the big fund groups.
“If they do not have the money to invest in a database or have their own ideas from their own performance screening, they will have to wait for people to bring ideas to them – and that will be the big fund shops who are well resourced,” he says.
This is a topic which will be explored in much greater detail in the forthcoming December issue of Portfolio Adviser, out later this month. However, in the true Olympic spirit, groups are all too aware that it is taking part that counts, no matter how crowded it gets at the starting blocks.
