Investment Ratings Process and Definitions
Investment Rating Process
Australia Ratings’ investment rating process is structured and consistent across different investment styles.
Following a meeting between two Australia Ratings analysts and the fund manager, our experienced primary analyst evaluates the fund based on quantitative and qualitative factors - reflecting performance against the fund’s benchmark and peers.
To maintain objectivity and consistency of the rating process, a rating committee decides and assigns the investment rating upon review of the rating analyst’s recommendation. And once an investment rating has been assigned, we ensure that our point-in-time report is relevant and reliable through ongoing surveillance.
Monthly performance monitoring and ongoing communication with fund manager is maintained and any significant changes to the fund and its managers will be communicated to the public. A fund rating is reviewed, at the very least, least once a year.
Investment Rating Definitions
Our investment rating reflects a forward-looking opinion aimed to help investors identify funds or investment opportunities that are among “best in class”. The analysis seeks to form a view on the consistency of the fund’s performance within the peer/style groups and also seeks to form a holistic view on the ability of the fund manager to produce superior performance amongst its peers in the near term. The rating of the fund is intended to give an investor a guide as to the appropriateness of an investment in a fund within the context of a diversified portfolio and with due regard to the medium term consensus view of the asset class to which the product is benchmarked.
Investment Rating Scale
A five-point scale is used to differentiate our opinion on how well we believe a fund will perform against a range of risks.
A “Hold” designation may
be applied to a fund rating in circumstances where a material change has occurred at the manager and a review is being undertaken to determine
if the rating assigned needs to be altered.
A “Sell” designation may be applied if after a review the rating committee considers factors significant enough that an investor should evaluate the suitability maintaining an investment in the fund as part of their diversified portfolio.
While fund ratings assigned by Australia Ratings are not intended to be predictive of future performance, they are designed to provide context and perspective for making knowledgeable fund investment decisions.
Product Complexity Indicator
A Product Complexity Indicator (PCI) highlights the complexity of an investment by its terms and conditions’ structure and transparency that may
affect the investor’s return.