Fund selection process
The selection process uses the following criteria:
Old Broad Street Research rating of A or above
Information ratio greater than 0
3 and 5 year performance of quartile 2 or above
See below for details on OBSR and the Information ratio.
For property where there are no OBSR ratings the fund recommendations are based on the information ratio and the performance.
The fund shortlist based on these criteria is then ranked in this order so that if a AAA rated OBSR fund was available this would be the recommended fund.
The top fund recommendations using this approach are as follows:
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Where the exposure to any market is greater than 10% a second or third fund will be used to diversify the risk of poor investment manager performance.
Old Broad Street Research
OBSR uses an investment research approach that has been in place since 1994. The emphasis is on looking forwards, not backwards; and for this reason they place a great deal of importance on the qualitative aspects of research such as understanding investment processes and meeting the management teams. Their conclusions are nonetheless also informed by detailed analysis of quantitative data such as historic returns. This means that they are aware of past results rather than driven by them and use this statistical information to validate qualitative research.
The OBSR Categories
Following interviews with the investment mangers and having gained an understanding of each fund in detail, they then apply the OBSR Categories™. This enables them to compare funds of similar types and underlying characteristics. Once the due diligence process is complete and the fund has been categorised, it may be considered for an OBSR Fund Rating. Where appropriate, funds are presented to the OBSR Fund Rating Committee for consideration. The ratings range from A to AAA, which is the highest available. These ratings are designed to be both an independent mark of quality and a clear indication of OBSR’s conviction in a manager’s ability to meet or exceed a fund’s objectives compared to other funds of a similar type.
Information Ratio
The information ratio assesses the degree to which a fund manager uses skill and knowledge to enhance returns. This is a versatile and useful risk adjusted measure of actively managed fund performance, calculated by deducting the returns of the fund benchmark from the returns of the fund and dividing the result by its tracking error. It is generally considered that the higher the number the better, with 0.75 reflecting a very good performance and 1.00 outstanding performance, with the caveat that the R-Squared correlation between the fund and its benchmark must be strong if any reliance is to be placed upon the information ratio.
Please contact me by email: or give me a call on 01347 868196 if you want to discuss any aspects of your financial planning.
