How we found the Fund Manager of the Year

In conjunction with Money Management, Assirt has created an assessment methodology for the Fund Manager of the Year awards that aims to recognise not only managers who have delivered impressive investment performance, but those who also have the requisite qualities to add value in the future.

The Assirt database of Australian managed funds is used to create a shortlist of worthy contenders. Along with the Assirt Fund Rating, a qualitative overlay based on any market information arisen since publication of the rating is used to complement the initial quantitative analysis.

An important focus of the methodology’s rationale was on the investor and how their best interests could be served.

In light of the growing popularity of the awards, Money Management and Assirt were mindful of who is ultimately affected by both the excellence and mediocrity to be found within the funds management industry.

This year, 46 managers were eligible for an award. In each category, the panel examined products from the three main tax structures: unit trusts, allocated pensions and superannuation. Managers were required to have at least one product, with an Assirt rating within the appropriate asset class, to qualify for inclusion in an award category (with the exception of those in the rising star category, due to the relative newness of the organisations).

Once a manager was found to be eligible for an award category, all of its relevant products with a three-year performance history were considered in the analysis (again, with the exception of those in the Rising Star category). Both retail and wholesale products were included.

For each manager in each award category (excluding rising star and alternative assets), the panel then looked at four factors: the average Assirt fund rating, one-year performance, a three year information ratio, and finally each of the short-listed managers was subject to a qualitative assessment. One-year performance reflects the annual nature of the award. A three-year information ratio recognises risk-adjusted returns over a period reflecting investors’ minimum likely term of investment. Returns were calculated to February 28, 2005.

The qualitative overlay accounted for a significant portion of the total score and looked at issues such as how well the funds were positioned for the current market cycle, whether they had experienced any significant inflows or outflows, the efficacy of systems and processes utilised, as well as the stability of the investment team.

The one-year return and information ratio figures for each manager are based on a size weighted average performance of the eligible funds in each respective category. Weighting the performance factors by fund size ensures a manager’s effort is going where their clients’ money is placed.

The scoring process used to assess candidates in the alternative assets category has a forward-looking focus relying on the manager’s Assirt rating. Only multi-manager fund of hedge funds were included in this category.

The rising star category was assessed in a purely qualitative manner and examined funds launched in the past five years. The panel considered the relative merits of start-up managers with prime consideration given to their ability to add value in the future.

To help determine the overall Fund Manager of the Year, points were awarded to the top three candidates in each category. Additional weighting was given to managers ranking in sectors in which maximum alpha can be generated, such as Australian and international equities.

This year, we were unable to propose a winner demonstrating clearly discernable ‘all-round’ excellence. As such, the Fund Manager of the Year 2005 is one whose strategy of focusing on a particular speciality had yielded the most impressive results in the context of the market environment.