02 Mar Quality of research varies greatly from shortlist to shortlist
An extensive analysis of fund shortlists found that the quality of research varies greatly from list to list, and so it pays for advisers and consumers to be more selective about fund selectors. The independent study by Fundscape and gbi2 analysed 36 gatekeepers in four different categories of fund selectors: D2C buy-lists, adviser buy-lists, rating agencies and off-platform lists.
These gatekeepers influence a significant proportion of fund flows and as a result, have the potential to make or break funds whose success in gathering assets may depend on being selected by one or more fund selectors.
The study by Fundscape and GBi2 also found there was a clear case for professional buy lists and active fund management. Passive funds play an obvious and complementary role in building portfolios, but because outperformance makes a significant difference to long-term investor outcomes, both active and passive funds should be considered.
Graham Bentley, MD, gbi2 said “the importance of research in fund selection is undeniable, but there are significant differences in the quality of the research processes we reviewed. There are plenty of funds that deserve to be on the lists, but there were also some that had less performance substance and more reputational and sales momentum. We were also surprised by the number of funds that were clearly strong candidates for inclusion, but were overlooked by some independent researchers.”
Using a combination of seven weighted factors (the Fundscape Factors), the gatekeepers were analysed and ranked on their overall research process. On this assessment, the leading three gatekeepers were HL Wealth 150 Plus, Bestinvest Best of Breed and ISA Ltd Growth Portfolio.
Bella Caridade-Ferreira, CEO of Fundscape commented “the Fundscape Factors and the Fundscape Frontier Funds can help advisers provide better outcomes for their clients. But the analysis will also be invaluable for fund groups to better understand what they need to do to improve their chances of being selected. Getting an independent assessment of your selection process is also beneficial for gatekeepers, and we have already been approached by other gatekeepers wanting to be included in future studies. This can only continue to enhance the value of this study to managers and advisers.”
Other key findings:
- Gatekeepers were analysed over one, three, five and 10 years. Bestinvest’s Best of Breed was by far the star performer. It topped the ranking in three of the four time periods and ranked seventh for one-year returns.
- Gatekeeper recommendations amount to 30% of the available fund universe (1,060 funds) but the total assets of these funds represent a whopping 96% of industry assets.
- The fund group with the most appearances on gatekeeper lists was Schroders. Its funds have featured a total of 203 times. Fidelity was second with 184 appearances, followed by Invesco with 162.
- The fund with the most appearances was the Stewart Investors Asia Pacific Leaders fund with 27 appearances in the 36 lists. It was followed by BlackRock’s Gold and General fund with 21 appearances, and in third place, Artemis Income with 20.
- Using the characteristics identified as important for fund selection in combination with Data Envelopment Analysis (DEA), we produce the Fundscape Frontier Funds list, a list of 99 funds that meet all our criteria and could be featured on gatekeepers’ lists.
- There are ten selection factors that fund managers should strive to achieve to improve their selection chances. Performance is, of course, a must and funds should have consistent alpha in the three years before as well as the current year if they want to get selected. It may be exceptionally difficult to grow assets to the required £200m minimum, achieve positive net sales and a balanced SPB ratio™, but encouraging the sustainable growth of assets is one of the keys to long-term success.
Download the press release here.
Notes to Editors:
About the Gatekeepers Report
The Gatekeepers report is jointly produced by Fundscape and GBI2 and is available as a stand-alone report as well as in combination with two levels of annual data subscriptions (basic and premium) that update and refresh the data on a quarterly basis. The study is an exhaustive review of fund selectors’ lists against several performance indicators, providing advisers, fund groups and gatekeepers with the tools to gain a competitive advantage in this fierce environment.
More information: fundscape.co.uk/service/gatekeepers-report/
Established in October 2010, Fundscape is a research house specialising in the end-to-end research and analysis of the UK fund industry. It is the publisher of the quarterly Fundscape Platform Report, widely regarded as the industry benchmark for platform data and statistics in the UK. With many years’ industry experience, its team is well placed to provide unique insight into asset management and distribution trends, including product development, distribution and marketing.
gbi2 advises firms on their investment propositions and marketing strategies, and on strategy regarding global relationships between asset managers and distributors. In the asset management space, it is helping fund managers navigate the impending “watershed” in the investment management industry, caused by the FCA’s increasing focus on fund groups’ customer relationships and associated product development.
For further information or background please contact:
Bella Caridade-Ferreira tel: +44 (0)20 7720 1183 email: firstname.lastname@example.org
Dr Tim Burrows tel: +44 (0)20 7720 1183 email: Tim@fundscape.co.uk
Graham Bentley tel: + 44 (0)7909 681176 email: email@example.com