Managers lack confidence in raters

Australian fund managers have delivered a blow to industry research houses, with a large number of them labelling the work and delivery of researchers as being of an average standard.

Fund managers expressed their lacklustre support of industry research houses as part of Money Management’s annual Rating the Raters survey, with the majority of managers believing the research houses’ ratings teams lacked experience.

A larger number of managers believe the researchers’ ability to communicate with managers is below average, while an even larger number rated the turn around time for their ratings by researchers as well below par.

However despite the negatives Lonsec emerged as the most highly regarded ratings house overall just ahead of Standard & Poor’s (S&P).

The results showed 75 per cent of respondents thought Lonsec’s ability was good or better with 25 per cent awarding the researcher with an ‘Excellent’ assessment.

In comparison S&P was rated ‘Good’ or superior by 67 per cent of participants with 8 per cent regarding their service as ‘Excellent’.

Other parts of the survey found 55 per cent of managers stated the experience of a research house’s team as average, while 62 per cent believed the level of communication between researchers and fund managers was average. However, 75 per cent of fund managers gave the researchers an average score for their turnaround time for providing ratings.

The survey found managers were in favour of the method researchers took in rating their products, though they were not resounding in their praise, with 58 per cent of managers giving the research houses a rating of good, while 42 per cent labelled them average.

In terms of the transparency of research houses’ ratings processes, fund managers returned a rating of 60 per cent good and 40 per cent average.

Managers scored researchers poorly regarding turnaround times in terms of providing ratings, with 13 per cent of managers believing researchers were good, 75 per cent average and 13 per cent below average.

The unfavourable results continued, with managers declaring researchers’ ability to reflect the investment capabilities of the managers’ business as being 54 per cent average and 46 per cent good.

Managers gave researchers a hint of praise, with 9 per cent of respondents deeming the depth and experience of research teams excellent.

However, the praise was short lived, with 55 per cent of managers believing researchers delivered an average result, while 36 per cent returned a good result.

In terms of communication, managers again scored researchers poorly, with 62 per cent stating researcher communication is average, 23 per cent excellent, and 15 per cent good.

However, despite handing the research houses a less than stellar score card, fund managers still believe research house ratings are influential. Fifty six per cent of respondents said researchers have a strong influence, while 38 per cent said they had some influence and 6 per cent no influence.

In relation to the influence a research house has on advisers, managers said 41 per cent of research house ratings have a strong influence, 53 per cent said some influence and 6 per cent said no influence.