The FE Passive Fund Rating service will go live from 22 April, providing scoring data on 250 exchange-traded and passive funds across nine asset classes.
Rated from one to five ‘Passive Crowns’, the service will be based on three fund criteria, listed in order of importance: tracking difference, tracking error and size.
While funds with assets under management totalling more than £100m will be scored higher than funds below that threshold, the ‘Passive Crown’ rating a product receives is aggregated according to its performance across all three scoring criteria.
The service is limited to funds for sale within the UK that have a track record longer than three years, and excludes commodities, leveraged and reverse trackers, along with smart beta products.
There will be 250 funds rated on the service at launch, with FE outlining its intention to add more to the range as dictated by user demand.
Michael Holland, FE’s managing director, said: “The funds industry is moving towards a hybrid of using both active and passive funds together and there has been a gap in the availability of quality research on passive funds owing to their complexity.
“What these ratings show is that past tracking ability of a passive fund can be used as a guide to how well that group will track an index in the future. The difference between the best and worst trackers/ETFs is large and makes a significant impact on the value of your investment. ”
