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Fund Ratings

Discussion in 'Managed Funds & Index Funds' started by pudsa, 17th May, 2007.

  1. pudsa

    pudsa Well-Known Member

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    This may well have been dicussed before, however was reading an SMH article yesterday (Wed 16 May) on Funds and came across the Morningstar ratings. Was intrigued to note that both Navra Australian funds are only rated 1 star on a scale of 5 stars (presume it means excellant) down to 1 star. Would be interested to hear opinions on Navra's rating, does it reflect performance, management, risk etc.
    Cheers
     
  2. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Different rating companies use different criteria.

    I'm pretty sure one of the morningstar criteria is performance versus peers ... with "peers" meaning funds that invest in the same market (ie the ASX200).

    Because of the conservative nature of NavraInvest (particularly the amount of cash it holds), it typically underperforms in a strongly rising market like we've had recently ... but I'd expect it to strongly outperform in a falling or sideways market.

    I don't pay too much attention to ratings - they are a very simple metric and are open to misinterpretation ... they don't tend to take investment strategy and technique into account.
     
  3. pudsa

    pudsa Well-Known Member

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    Thanks Sim, appreciate the feedback. Tends to be a bit disconcerting to see a company which I have a lot of faith in rated so low on the scale.
    Cheers :)
     
  4. Nigel Ward

    Nigel Ward Team InvestEd

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    Agreed Pudsa.

    But I look at it this way. NavraInvest is really an absolute return manager (i.e. what some people would call a hedge fund) but one who doesn't short sell or use derivatives. Rather it relies on its proprietary trading system to generate a high return regardless of market movements. A tricky task for a long-only equities fund.

    But if you compare the last few years' record with other hedge fund/absolute return funds then it's done pretty well really.

    just my 2.2 cents worth...
    Cheers
    N.
     
  5. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    Have a look at the morningstar website - they do describe their methodology, and they place a lot of emphasis on market sectors and relative performance of funds within the same sector.
     
  6. MJK

    MJK Well-Known Member

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    I would have thought that NI was to young to have a high star rating. Stars come based on track record??

    Also the margin lenders are happy to lend 75% against NI.

    MJK:D
     
  7. Simon Hampel

    Simon Hampel Co-founder Staff Member

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    This is a very good point ... I take the approach that a margin lender does a good bit of research into a fund before deciding how much risk to offer on it (ie the maximum LVR they will allow) ... so one of the criteria I use to choose a good fund is based on what max LVR I can get !!

    Essentially, my shortlist of funds is chosen based on three criteria:

    1. 3 & 5 year performance versus the rest of the market
    2. High LVR offered by margin lenders (70% or 75%)
    3. Sector ... I generally hold sector based funds (either industry or geography) for areas where I believe there should be good growth in the short to medium term

    Ratings don't come into the equation at all!