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Morningstar survey places Foord first

Personal Finance

Foord Unit Trusts is the top asset manager in a new survey, released by Morningstar, that ranks South African collective investment scheme management companies according to the performance of all their qualifying funds under management.

Allan Gray was ranked second and boutique manager Truffle third, based on two different averages of their retail funds’ performance-based Morningstar ratings.

Morningstar, a United States-based ratings agency, assigns funds a rating of between one and five, based on risk- adjusted returns over three, five and 10 years, weighted in favour of the longer periods. Certain funds, such as money market funds and those with short track records, are not rated.

Morningstar has now used its individual fund ratings to determine two different aggregate ratings for South African managers to the end of June. It calculated an overall-weighted rating and an asset-weighting rating for each qualifying manager and ranked them accordingly. The overall-weighted rating is a simple average of the managers’ individual fund ratings. The asset-weighted average is determined by weighting the fund ratings according to the amount of money invested in each fund.

A manager must have at least R5 billion in assets under management in funds that can be rated and three funds for retail investors with Morningstar ratings to be included in the survey.

The Morningstar manager survey differs from the PlexCrown Fund Ratings survey of management companies (above) in that Morningstar requires only three rated funds, while the PlexCrown survey requires managers to have one fund at least in each of four broad unit trust sectors: South African equity and real estate, South African interest-bearing (including multi-asset income), South African multi-asset (excluding multi-asset income), and rand-denominated global and worldwide.

Managers such as Foord and Truffle are ranked in the PlexCrown ratings in the sectors in which they participate, but do not qualify for an overall rating for the management company rankings because they do not have a fund in each sector.

The other differences between the PlexCrown and Morningstar rankings of managers will arise because:

• The PlexCrown ratings are based on four or five different measures of risk and reward, while the Morningstar ratings are based on performance, risk and fees.

• The PlexCrown ratings used for the management company ratings are only those for funds with a five-year track record, while the Morningstar analysis includes funds with only a three-year track record.

• A manager’s overall PlexCrown rating is calculated in two steps. First, its average rating in each of the four broad unit trust sectors is determined from its fund ratings in that sector weighted according to the assets under management in each fund in each sector. Then an overall average rating is determined using each of four broad sector average ratings with the following weightings: South African equity and real estate, 25 percent; South African interest-bearing (including multi-asset income), 25 percent; South African multi-asset (excluding multi-asset income), 35 percent; and rand-denominated global and worldwide, 15 percent. This means the ratings of the funds in the sectors with higher weightings have a greater influence on the overall averages in the PlexCrown survey.

Morningstar’s methodology for its asset-weighted average weights the funds’ ratings according to assets under management. It does not have any sector weightings.

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