Choosing the winners of our newest awards ....
The alternative asset category considered absolute return funds that employ an alternative investment strategy in the pursuit of an absolute return objective.
These managers and their funds need to be treated differently because the alternative assets industry is about achieving risk-adjusted returns, not about beating a benchmark.
The total return manager has a toolbox of financial assets and products that can be used to reduce or hedge unwanted risk and can use leverage to increase exposure to wanted risk in order to generate extra alpha.
Because of the different toolboxes available to total return managers, a different set of risks needs to be assessed and evaluated.
To be considered for the award funds must have sought to achieve a total return objective and employed some form of alternative investment strategy such as shorting and leverage. Funds should have sought returns that were non-aligned to traditional benchmarks.
They also had to be rated as investment grade byAssirtand have a performance record greater than one year but less than five.
The award was calculated in the following way:
• 60 per cent was made up of the average Assirt Rating Score (ARS) of a manager’s products within each of the relevant asset classes; and
• 40 per cent was made up of three return and risk measures, with the respective weightings: 20 per cent risk/return (Sortino Ratio) weighted for three years; 12 per cent past performance weighted for one year; and 8 per cent drawdown/recovery weighted for one year.
Assirt awarded the manager that consistently exceeded its benchmark and that had also demonstrated an awareness of downside risk management. In assessing one-year performance, returns were measured relative to funds’ respective return objective.
Each of the three factors were converted to a standardised score before applying the weightings to generate an overall Asset Class Score.
The Rising Star winners were determined in the following way:
• 60 per cent was made up of the average Assirt rating score (ARS) of a manager’s products within each of the relevant asset classes; and
• 40 per cent was made up of the size weighted one-year performance (SWP) of eligible funds relative to their respective benchmarks.
Many managers had little over one year’s performance history, so it was not possible to make meaningful comparisons of past risk or information ratios. In assessing one-year performance, returns were measured relative to funds’ respective benchmarks.
Each of the three factors were converted to a standardised score before applying the weightings to generate an overall asset class score.
The standardised score for each factor was calculated as: (Result — Average Manager Result) / Standard Deviation of manager results.
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