Finding the Fund Manager of the Year winners

The Money Management/Lonsec Fund Manager of the Year Awards are designed to recognise excellence in funds management.

This year’s awards feature 12 categories, which have been judged by independent research firm Lonsec.

The process Lonsec implemented to select the winners for each category consisted of three components.

As an initial screen, the funds needed to be rated by Lonsec.

Lonsec’s managed funds research rating process is qualitatively skewed. Lonsec believes that managing money is a combination of ‘art’ and ‘science’.

Lonsec does not accept that there is one way to manage money, although it believes there are a number of critical ingredients that combine to produce a quality investment product.

Lonsec’s assessment of people (experience, quality, team depth, turnover, work environment and structure, key person risk) and investment process has the greatest impact on its rating process.

From this screened universe, Lonsec utilised two equally weighted components to select the fund manager of the year winners in each category.

The first component was the one-year excess return for the funds for the calendar year 2007.

Since the majority of retail flows are invested in wholesale trusts via platforms, wholesale trusts were used as the vehicles for performance calculation for managers.

The second component was a qualitative analyst ‘momentum’ score, which was determined by the Lonsec research analysts for each manager in the category.

Factors that were considered in this momentum score included process enhancements, team stability and depth, as well as risk management.

The highest scoring manager from the aggregate of these two components was declared the winner in each category.

Lonsec’s aim was to recognise managers that performed strongly in their category in 2007 and, equally importantly, are well positioned to deliver superior performance in the future.

For the Rising Star category, Lonsec limited its scope to companies and products that have been available in Australia for less than three years (to December 31, 2007).

For the overall Fund Manager of the Year award, Lonsec used a voting process involving the Lonsec research team.

Nominations were made for managers. Nominated managers were then ranked by each member of the research team, with points awarded based on these rankings.

The highest scoring manager was declared the winner.