Synaptic Research uses mutual fund and index data supplied by Financial Express Limited.
FE is a data company which specialises in the collection, validation, dissemination and analysis of fund information.
It supplies more than half of all UK fund management companies, providing value for money solutions which emphasis a flexible, reliable and customer service-driven approach.
FE collects fund prices, dividends, histories and factsheet data for around 120,000 UK, offshore and international funds. It provides an additional layer of research and analysis technology to help its customers to educate and inform fund management professionals, financial advisors and investors.
The data items supplied by FE include:
- Core fund information such as name, sectorisation, management group and fund size.
- Monthly, annual, and cumulative past performance.
- Some derived functions of past performance such as volatility and quartile rankings.
- FE ‘Crown ratings’.
- Asset allocation.
- Index data and sector averages.
Synaptic then collects the following additional information, and adds it to the FE data:
- Manager’s name and length of service.
- Manager’s comments and aim of fund.
- Derived calculations from the FE past performance data, such as alpha and beta.
- Fund’s ethical policy.
All questions regarding data source or accuracy should be addressed to Synaptic in the first instance.
FE Crown Ratings
FE Crown Fund Ratings are quantitative ratings ranging from one to five designed to help investors identify funds which have displayed superior performance in terms of stock picking, consistency and risk control.
FE Crown Fund Ratings apply to all the main FE universes including unit trusts and OEICs, investment trusts, life funds, pension funds and offshore funds. The scores are updated quarterly at the end of March, June, September and December, using three-year total returns.
FE Crown Fund Ratings are calculated by building up a score. The score is made up of three parts, and each part is calculated by reference to a benchmark for the fund.
FE has used 290 well-known benchmarks, including sector averages and indices, to find a ‘best-fit’ for each fund. Where sectors are homogenous and not too diverse, FE has retained use of the sector average as a benchmark. However for more diverse sectors a best-fit, appropriate benchmark is assigned. This best fit is compared to the best-fit two years ago, to assess the persistency of the fit, and rules are applied to resolve any lack of consistency. If FE cannot find a benchmark with an r-squared co-efficient of 0.75 or more, the fund will not qualify for a rating. The appropriateness of a fund’s benchmark will be reviewed every two years.
Once the benchmark has been assigned, FE then applies three tests to the total return history of the fund:
- The alpha test: FE calculates the alpha generated over the last three years, and then adjusts this for the volatility of the fund. This process makes the alpha of funds more comparable.
- The volatility test: FE compares the volatility of the fund over the last three years with that of the chosen benchmark and assigns a score. For extremely low volatility funds where minuscule volatility can seem proportionately large – Money Market, Gilts, and Index Linked Gilts – the volatility component is ignored.
- The consistency test: FE looks at the extent to which a fund consistently manages to outperform its benchmark over successive quarterly periods over the last three years.
Funds are grouped into ten sub-asset classes, and for each of the tests, the raw scores are spread out in an array from zero (worst) to 100 (best). Within each grouping, funds are given FE Crowns based on their total scores, according to the following distribution:
- The top 10% of scores in each grouping - five FE Crowns
- The next 15% - four FE Crowns
- The next 25% - three FE Crowns
- The next 25% - two FE Crowns
- The bottom 25% - one FE Crown
Funds which fit the below criteria are excluded for technical reasons:
- Low correlation funds
- Funds with short history
The following sectors are also excluded
- Personal Pensions
- Protected Funds and Structured Products
- Absolute Return funds
The Protected and Structured Product category is the most sizeable, due to the recent launch of numerous products. These are not suited to an FE Crown Fund Rating. The Absolute Return sector is generally very poorly correlated to conventional benchmarks, and so is not suitable for the mainstream FE Crown Fund Rating methodology.
FE content is the intellectual property of Financial Express Limited. Any copying, republication or redistribution of FE content, including by caching, framing or similar means, is expressly prohibited without the prior written consent of FE. FE shall not be liable for any errors or delays in content, or for any actions taken in reliance thereon. FE and the FE logo are trademarks and registration trademarks of Financial Express Limited. For additional information on other FE services please visit the FE public website http://www.financialexpress.net/uk/index.htm.