How we choose Our Top-rated Funds

Our Top-rated Funds highlights the funds our research team believes will deliver for our investors. But if you’ve ever wondered how we decide which ones make the cut, this article can give you some insight.

Published on 18 Sep 20182 minute read

Not just past performance

It’s not as easy as looking at funds that have performed well in the past and then judging that they will probably perform well in the future. In an academic study in 2011*, it was proven that looking at the performance of funds over the past five years and using this to predict the next five years was about as effective as rolling a dice – there is only a one in six chance of being accurate!

Instead, we use a combination of mathematical performance analysis and a qualitative approach that we call our 10 principles of manager selection.

The maths

We start off by looking at how well each fund manager has performed over their career. We then carry out a statistical analysis of performance data to make sure a manager’s success comes from skill and hard work rather than luck.

The 10 golden rules

We have developed 10 principles of manager selection, which we use as a framework to take an in-depth look at the people, process and philosophy behind each fund. A few of the most important areas we look at are:

They don’t hug the benchmark

We look for managers that don’t hug the benchmark, meaning they avoid simply replicating the index they are being measured against. Our chosen managers will have conviction in their own ideas and won’t be constrained by the companies that make up their index.

Never trust a thin cook

We also think it’s important to have managers that invest their own money in their funds, aligning their interests along with those of their investors. You know what they say – you can never trust a thin chef, and you’d be surprised how many fund managers don’t taste their own cooking.

Clear objectives

Managers that have a clear investment goal and a consistent investment approach are well-received by us since they know exactly what they want and how they are going to achieve it. When managers define how they want their success to be measured, we can set realistic expectations before investing in the fund.

Reviewing our position on a fund

We constantly reassess our list of top-rated funds. Our research team checks performance data on a daily basis and meets every month to discuss each fund on the list. Our analysts will also hold meetings with all our chosen fund managers three or four times a year to keep up to speed and to see if anything has changed to the point where we may need to reassess our view of a fund.

Get a hold of our top-rated funds

If you’d like to see all of our top-rated funds, download the new edition of the guide today. The guide showcases the full list of funds that have passed these criteria – those funds that our research team believes are the highest quality from the major investment sectors across the globe.

Download the guide