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Fitch Launches Global Fund Quality Ratings Powered by Lipper Data

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Fitch Ratings today launches a new type of fund rating – Fund Quality Ratings – that combines Fitch’s expertise in qualitative fund analysis with rankings and performance data from Lipper, a Thomson Reuters company and leading provider of fund performance data.

Fitch’s Fund Quality Ratings offer an independent, forward-looking assessment of a fund’s key performance and risk attributes and consistency of longer-term returns, relative to peer group or benchmarks.

The ratings focus on the fund manager’s investment process, key fund performance drivers, risk management, and the quality of the fund’s operational infrastructure. The ratings will be distributed globally and will be available on Thomson Reuters’ wealth platforms.

“Globally, investors are looking for objective, forward-looking analysis of funds’ investment processes and performance drivers,” says Roger Merritt, Managing Director and Global Head of Fitch’s Fund and Asset Management Ratings group. “Fund Quality Ratings meet this need by providing a level of transparency and institutional quality analysis that was previously difficult to access.”

Fund Quality Ratings are assigned following an on-site review and full interaction with the fund manager’s key personnel. As such, they provide a useful perspective in comparison with traditional fund ratings, particularly quantitative rankings that are backward-looking, by incorporating analysis of:

— The fund manager’s investment strategy and practices

— The main drivers of risk-adjusted performance results

— The manager’s resource commitment, depth and quality of staffing, and technology infrastructure

— The manager’s experience, financial resources and strategic commitment to the fund

— benchmarking against longer-term, historical risk-adjusted performance for established funds, using Lipper and other data to analyse performance relative to peer groups

— The strength of the operational platform, including custody, valuation, counterparties and governance

“There are over 35,000 funds available to investors in Europe alone and UCITS developments will amplify cross-border distribution,” says Aymeric Poizot, head of Fund and Asset Management Ratings for Europe, Middle East and Asia-Pacific at Fitch. “Investors need clear, insightful analysis and research to help them navigate this maze of investment offerings.”

Fund Quality Ratings are assigned on a six-tier scale. Established funds are rated from ‘Excellent’ to ‘Inadequate,’ while funds without a three-year track record may be rated ‘Qualifying’ based solely on a Qualitative Assessment of the investment process and operational setup. Funds rated ‘Excellent’ demonstrate the highest proficiency and strongest resource commitments in key areas of the investment process and have delivered high, consistent risk-adjusted returns relative to peers and/or benchmarks.

“The market for funds in Latin America is undergoing rapid growth and increased cross-border activity,” added Davie Rodriguez, head of Fund and Asset Management ratings for the region. “Fitch sees a clear need for this product in the region where we currently rate over 500 funds and 30 asset managers.”

Fitch will hold a webcast to discuss Fund Quality Ratings on Thursday 29th September, at 9:00 a.m. US Eastern time/ 2:00 pm UK time/ 3:00 pm Central European Time.

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