Fund managers pick their favourites

The Money Management Rating the Raters 2006 survey asked for feedback from fund managers about their experiences with seven of the major researchers in the market and to give each of them an overall rating.

The final results show the majority of fund managers think Lonsec offers the best overall ratings service with 50 per cent of respondents agreeing it was good. A further 19 per cent of participants feel Lonsec’s performance is excellent.

Independence and the ability to avoid potential conflicts of interest was high on the list of important characteristics for researchers to have as far as fund managers were concerned. Lonsec again scored well in this area, with 47 per cent of respondents believing it was good at maintaining impartiality.

Lonsec general manager Grant Kennaway says the structure of the business helps his organisation uphold its perceived independence in the market.

“Our business is just research and stockbroking, and we only service financial advisers. So we’re a very focused business on the financial adviser market and I think that specialisation is a strength,” he says.

“Lonsec’s been doing managed funds research for about 20 years and we’ve worked very closely with our clients over that time to deliver a product that they want and need,” he adds.

Other research houses to receive strong endorsement from the fund managers were van Eyk and Morningstar, with 38 per cent of respondents registering a good score for both raters in regard to overall ability.

In terms of a clear second place, van Eyk finished just ahead with 9 per cent of participants registering its overall service as excellent, while only 3 per cent responded the same way about Morningstar’s general capabilities.

Managing director of van Eyk, Stephen van Eyk, attributes the success of his company to its origins.

“We’re probably one of the few research houses over time that was actually run by the researchers themselves. I think therefore you focus on what’s important, and the way your business is structured stems from that.

“In other words, the things that you liked when you were an analyst you give to other analysts because you know they won’t be happy if they don’t get that particular information,” he says.

Van Eyk also feels that keeping his own business in order rather than worrying about everyone else is critical.

“I don’t actually know what my competitors do because I don’t concentrate on that. We do just concentrate on what we do and we try and do it really, really well,” he says.

Morningstar head of research Justin Walsh believes his firm’s global structure gives it a distinct competitive advantage.

“We’ve got a very large head office in Chicago with a very strong analyst team. We’ve also got an analyst team which is building in Europe. So there are a lot of people we can talk to about trends, about different issues in different markets, and about different investment managers and share the views around,” he says.

“At the end of the day though, we still control what’s released in this market.”