Former JP Morgan subsidiary RiskMetrics Group today launched “Best and Worst” Fund Evaluations, a free assessment of equity mutual funds, designed to bring a greater level of transparency to the mutual fund market.
The risk-adjusted fund evaluations take account of fund managers’ proficiency in managing risk over an extended period. The quantitative approach identifies those funds that have provided the greatest risk-adjusted outperformance, while maintaining the most stable level of risk over the last five years. RiskMetrics Group will launch the lists simultaneously in the United States and United Kingdom, and will rate all publicly traded equity mutual funds/investment trusts in the US and UK.
“Our purely quantitative and transparent approach spotlights those managers who show an exceptional level of consistency in generating risk-adjusted outperformance,” says RiskMetrics Group CEO Ethan Berman. “This approach allows us to separate fund managers who govern risk from those who are erratic.”
The “Best and Worst” Fund Evaluations are assigned within four style categories: conservative, balanced, growth, and aggressive. These categories are determined by the risk profiles of each fund. Only those funds with the statistically highest- and lowest-scores will be displayed.
“Investors should pay less attention to what a fund calls itself and more attention to what kind of risks the fund is taking,” add RiskMetrics Group market strategist Michael Thompson. “Moreover, investors are likely to be more successful thinking in terms of risk allocation than asset allocation. RiskMetrics Group “Best and Worst” is designed to address these shortcomings by rewarding funds that outperform on a risk-adjusted basis more consistently than their competitors.”
Since it was spun out of JP Morgan in 1998, RiskMetrics Group has established seven offices around the world, including New York, London, Tokyo, and Singapore.