Funds will now be rated by the symbology Platinum, Gold, Silver and Bronze, which takes place of the previous ratings AAA, AA, A and TR.
The change has been backed by S&P’s own poll of 110 fund professionals – including wealth managers – which found that 64% believe that grading/rating funds will become more important as a result of RDR, where there will be more emphasis on justifying investment selection.
Increasing M&A activity and the consolidation of funds, as groups look to achieve economies of scale, as well as expansion into new markets have also been identified as factors that will fuel demand for fund grading.
Peter Fuller, head of European research at S&P Capital IQ, said: “We have seen a surge of new entrants into the funds market place in spite of some tough market conditions. The growth of new boutiques and niche proposition providers is driving the need for more robust analysis based on a flexible and pragmatic approach that encompasses insight into new products and deep knowledge of a fund manager’s investment record.”
“At the heart of our gradings approach is analysis of performance consistency. Transparency of costs is important but the cheapest managers do not necessarily offer the best returns or most consistent performance to their investors.”
This year Morningstar also launched its new global fund rating scale using gold, silver, bronze, neutral and negative tags instead of elite, superior, standard, inferior and impaired.
