And these are already competing with the research done by the likes of Rayner Spencer Mills – a mini OBSR – Financial Express (newly rebranded as FE), hundreds of wealth managers, discount brokers (Hargreaves Lansdown and Chelsea Financial Services are the leaders in this field), life companies, platform providers and others gearing up for the expected increase in outsourcing from intermediaries post RDR.
So does the industry need another firm to rate funds? Do fund managers want to spend time with yet AN Other individual asking the same questions as every other rating agency? Will fund buyers get anything different from Fitch than they get already?
Fitch Ratings uses Lipper’s base fund data and aims to provide a “forward-looking” assessment of funds. The rankings will be from “excellent” at one end to “inadequate” at the other as part of a six-tier ranking system.
Its business model is that the ratings will be paid for by the funds themselves.
This is the same model that Standard & Poor’s has operated for years, and has been criticised for for years – if a fund house pays someone else to rate its funds it is in effect buying some of the rating agency’s independence. If you were paid to go to the Maldives and write a report on it, are you likely to rubbish the tropical paradise?
Other criticisms of S&P – and by inference Fitch in a year’s time – is that they visit the managers twice a year when a great deal can happen in those six months; their analysts are generalists not specialists so too much time during each meeting is taken up with scene-setting.
A criticism that can already be made of Fitch is that nobody knows that they provide this service – they have not yet consulted any of the buyers of these ratings to ask what they think.
So does the industry need another firm to rate funds? No, and especially not if the answer is a direct copy of a business model in the UK that is already broken.
