van Eyk Research has rejected 19 Australian equities funds in its review of the sector, claiming they were not sufficiently competitive, while awarding five funds its top ‘AA’ rating.
The research house said it looked at a total of 69 strategies as part of its assessment of long-only Australian equities funds. Five funds which were invited to take part declined, alongside the 19 funds which were screened out of the review.
van Eyk head of manager research Matthew Olsen said the 19 managers screened from the review suffered from one or more of a number of failings including insufficient levels of active risk in the portfolio, which meant the managers and the fund were less likely to create excess return for investors. The funds also displayed insufficient manager skill and an investment process that differed little to the rest of the market.
Of the funds that were included in the review, five scored an AA rating, 19 scored an A rating, 18 scored a BB rating and three funds scored a B rating, with the managers reviewed showing growth, neutral, value and quantitative investment styles.
The research house said it was making public the news that one-third of managers were either removed or chose not to participate, as it felt it was necessary to disclose the complete sample from which the recommended funds were chosen.
van Eyk chief executive Mark Thomas said this would allow users of the research to judge the selective nature of the ratings process and its outcomes. At the same time planners could see what happened to all funds in the review, while fund managers would be discouraged from shopping for ratings with their funds.
Written by Jason Spits in Money Management.