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Funds: Why Family Matters

The Morningstar Europe, Middle East, Asia Fund Family 100 report looks at fund parent companies through an analyst's eyes

Jackie Beard, FCSI 30 April, 2019 | 9:15AM

At Morningstar, we see long-term opportunities for firms that prioritise investors and align their interests with those of their shareholders. A strong corporate culture is one that exhibits a clear mission to put the investor first and attracts and retains professionals who also support that goal.

This view is a fundamental part of our five-pillar analyst rating methodology, and a consideration that comprises the Parent Pillar. It’s also why our evaluation of fund families strives to identify which firms are in business to maximise their own profits and which firms build a fiduciary relationship with their investors.

Here, we introduce our new structure for this fund-family evaluation:the Europe, Middle East, Asia Fund Family 100 report, which will be published semi-annually – this edition’s data is as of January 31, 2019 – and provide a deep dive into how firms stack up against one another.

How We Determine Top Fund Families

Morningstar analysts consider a multitude of data points when evaluating fund families, such as manager retention and disclosure of fund manager. Ultimately, the report serves as one comprehensive document that compares the top 100 firms by assets under management when looking at funds available for sale in Europe, including ETFs.

While the qualitative assessment of our Parent rating involves more than an analysis of data points, the report’s further breakdown of the individual firm allows investors to view all firms through the eyes of a Morningstar analyst.

These reports show each firm’s total assets, and slice and dice this number several ways in order to show, for example, the split between asset classes or the split between active and passive strategies. Then, we rank the result of each measurement in the context of these 100 firms. Though we provide several specific ratings, we have refrained from calculating an overall ranking for each firm as we recognise that certain elements may matter more than others to each investor.

Top-Ranking firms for Morningstar Medalist Funds

The top three spots in a firm’s fund range, when considering the percentage of funds that maintain a Morningstar medalist rating, are held by Fundsmith, Artemis, and First State. Both Fundsmith and Artemis have Positive Parent Pillar ratings, while First State has a Neutral rating.

The three firms are broadly similar in size and have focused fund ranges—they aren’t trying to be all things to all people. And while the firms are not the cheapest, at an aggregate level they have stability among fund managers.

We can see their funds have generally performed better than average, as well. We calculate this through the Morningstar Risk-Adjusted Success Ratio. This is a measure of the percentage of a firm’s funds that have survived the time period and delivered a Morningstar Risk-Adjusted Return, or MRAR (a measure of a fund’s earnings as compared to the amount of risk it took on over a certain time period), that is better than the median fund’s MRAR in their respective Morningstar categories.

Which Fund Families Include the Most Medalists?

Though those firms come out on top for percentage of medalists, the report shows that the numbers shift slightly when considering the highest raw number of medalists. When the funds are assessed that way, the top spot goes to iShares, with 51 funds holding a Morningstar Analyst Rating of Gold, Silver, or Bronze. Other top companies include BlackRock with 48, Fidelity with 42, JPMorgan with 34, and Vanguard with 27.

Which Fund Family has the Highest Success Ratio?

When we leverage the Morningstar Risk-Adjusted Success Ratio to evaluate the 10-year success ratio for a fund family’s range, ACTIAM and AEGON tie for the top ranking at 100%. Other top performers include Baillie Gifford (86%), First State (85%), and Robeco (83%). This shows that in addition to these firms’ funds having longevity, they have all ranked above spot 50 in their respective categories over the last 10-year period.

This comprehensive look at the various elements of the largest fund families available for sale in Europe, and their respective fund ranges, can help investors better understand where those fund families’ strengths and weaknesses lie. This data can help drive more-informed decisions about which fund families to consider investing with in the months ahead.

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Jackie Beard, FCSI

Jackie Beard, FCSI  is Director of Manager Research Services, Morningstar EMEA

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