**NEW SERIES: 5 minutes with… Juliet Schooling Latter, FundCalibre
11 November 2019
Part of our new series where we fire a number of quick questions at people in the industry, to help provide insight into what they do and offer the market,
We spoke to Juliet Schooling Latter, research director, FundCalibre, about the art of fund ratings and in particular how the firm’s Alpha Quest tool works in helping to assess funds worthy of the firm’s Elite Rating, and how it can help paraplanners with fund selection.
How long has FundCalibre been rating funds?
FundCalibre was launched in 2014, since when it has built a great reputation in both the investor and adviser community, thanks to its rigorous process. We now rate around 170 funds and trusts in total, the Elite selection.
What do you look for from fund managers?
The main thing we look for is skilful managers who can demonstrate a repeatable and consistent process. We like managers with experience of investing through all periods of the stock market and economic cycle, particularly the tough times.
Where does Alpha Quest get involved in the ratings process?
At the very start, funds and trusts must pass Alpha Quest to have any chance of getting an Elite Rating. The longer the track record of the manager on that fund, the more efficiently we can analyse the value he or she has added. Managers must have at least a three-year track record to pass this screening process before we proceed any further (although the longer the better).
The screening system itself analyses risk-adjusted past performance, by stripping out the impact of market movements to identify returns that can truly be attributed to a manager. It then measures the consistency of the returns, to help us determine whether a manager is actually skilled, rather than lucky.
How do you think Alpha Quest differentiates you from your peers?
We think our process is unique because we attempt to calculate the probability of future alpha. This is achieved by back-testing the data. Specifically, to qualify, a fund manager needs to have at least a 55% chance of delivering alpha in the next 12 months. Whilst this may sound quite low, only a minority of funds and trusts – around 30% of the total – survive this screening. We think having this powerful screening tool helps remove any perceptions of a potential conflict of interests, and guarantees only the best vehicles have a chance of a rating.
Does passing the quant process qualify a manager for an Elite Rating?
No, that is only the first stage. Funds and trusts that qualify are then passed on for detailed qualitative analysis. Our experienced research team will interview the manager face-to-face to understand the process and, importantly, the risk and control systems behind it.
Once this interview has been concluded, the research will be subject to peer group review within our team. As a rule, we only rate a maximum of 10% of funds and trusts in any single sector – but the number is often much lower.
Why should paraplanners consider your ratings?
Unlike some, we do not want to rate as many funds and trusts as we can, as we believe this defeats the purpose and de-values any rating. We also do not have a tiered ratings system, for example 1 to 5 or gold, silver and bronze. Our philosophy is simple: a fund or trust is either Elite or it is not. Our rating is nice and simple and doesn’t result in an overwhelming list or products. We also have one of the most experienced investment teams in the industry to support our powerful quantitative tool.
We want the Elite Rating to be a badge investors can believe in. There is no pay-to-play – AlphaQuest makes sure of this – and funds and trusts get a rating whether the company chooses to buy a licence to use the badge or not. It’s transparent, it’s independent and it’s robust.
To find out more about Elite Rated funds, visit www.fundcalibre.com
ATEB Consulting’s Steve Bailey looks at how the FCA’s view of suitability and what that means in practice for...
Paraplanners who have been furloughed and are concerned that their company will not have a job for them should...
The Supreme Court has ruled that a pension transfer made in ill health should not be subject to inheritance...