Best and worst – it's all quantitative
How do you rate the performance of fund managers in such a way that investors can see the risk level that is being taken and the consistency of the returns being delivered? RiskMetrics Group, the New York-based analytics company, thinks it has found a way. The firm has launched "Best and Worst" - an evaluation of mutual funds and investment trusts in the US and UK that ranks the best and worst performers in managing risk and delivering returns over an extended period.
"What we are showing, in a purely quantitative way, is which funds have outperformed, on a risk-adjusted basis, over a five year period with the greatest amount of consistency in performance," says RiskMetrics' market strategist Michael Thompson.
He says other fund ranking systems set too much store by primitive return analysis - such as straight-line average - and often include a qualitative factor that should be irrelevant to investors.