The sectors where most invest in poorly-rated funds
Funds under management (FUM) in sectors such as global property and specialist equities are heavily concentrated in funds that score poorly under the FE Crown ratings, research by Money Management shows.
The FUM in the one or two crown-rated funds – which are the two bottom ranks in the ratings – in many sectors far exceeds 50 per cent, which is much higher than would be expected.
FE Crowns are calculated so that 25 per cent of funds receive the bottom rating of one crown and 25 per cent get the second lowest score of two crowns. Despite an even distribution of funds across each rating though, for some sectors this has not translated to a similar spread of FUM.
The ACS Property – Global sector had the highest portion of FUM in low rated funds, with 98.69 per cent of assets being invested in one and two FE Crown funds. This amounted to $86,179,000 FUM, out of a total of $87,320,000 invested in crown-rated funds in the sector.
The sector also had a disproportionate number of funds awarded low ratings however, with 90 per cent of its members receiving one or two crowns. Just five per cent were granted five crowns, compared to the overall average of 10 per cent. Only 0.14 percent of FUM invested into the sector were put into these funds.
The one crown rated funds with the most FUM invested in them were the AMP Capital Global Property Securities and Advance Global Property funds.
The ACS Equity – Specialist and ACS Equity – Global Small/Mid Cap sectors had the next highest amount of FUM in one and two crown funds, with 91.76 per cent and 85.36 per cent respectively. They too had lower than average investments in five Crown funds, both with less than 2.05 per cent of FUM invested.
When looking at the actual number of low-rated funds, just 45.45 per cent of ACS Equity – Specialist members hold one or two crowns (below the average under the ratings’ methodology). Some 9.1 per cent of its members are five crown rated, but a disproportionate share of assets has gone into the funds with the poorer ratings.
The distribution of funds in the bottom ratings in ACS Equity – Global Small/Mid Caps was skewed similarly to the spread of FUM in this sector though, as 85.71 per cent of funds had the bottom two ratings. This figure was within one per cent of the FUM invested in the two bottom quartiles.
AUTHOR
Hannah Wootton
Recommended for you
The $673 billion global investment manager has appointed a former Zenith sales head as it seeks to expand its reach in the Australian wealth management market.
Fund managers may be operating in a squeezed environment, but a salary guide shows they are willing to pay up for specialist talent to diversify their fund range.
Reach Alternative Investments has entered into a strategic partnership with Russell Investments to bolster its wholesale private markets offering for financial advisers and investors.
Boutique investment consulting and research house Genium Investment Partners has announced a senior appointment to drive further growth in its research ratings business.
