Alongside this month’s bi-annual rebalancing of the FE Crown fund ratings, FE have decided to stop using the Investment Association’s classification for risk-targeted funds within Mixed Asset sectors, instead comparing funds which are designed to take on a specified level of risk with similar products.

FE Trustnet believes this classification will give advisers and investors a clearer picture of a fund’s relative performance based on its objective rather than its outcome relative to incomparable peers.

Head of FE Research, Rob Gleeson, said: “We think the Investment Association’s classification is inappropriate for risk targeted funds, so we’re switching from theirs to our own.”

“We thought risk-targeted funds were not being well-represented in the mixed asset sectors. They weren’t designed to beat sectors, they were designed to match a certain risk target, so they shouldn’t be judged on their performance against a sector.”

“So instead of measuring these funds against the mixed asset sectors, they are measured against other risk-targeted funds. Now the best 10% of risk targeted funds will receive five FE Crowns. We think this is a better representation of their worth.”

Sam Walker, Head of Data at FE, added: “Advisors had been calling out for a segment to see all of these risk targeted products under one umbrella, not scattered amongst IA sectors, or unclassified. They want to do research and governance on such solutions, and see how much return has been generated for the volatility it has exposed its investors to.”

“FE Crown ratings complement this approach to find those solutions which have offered the best quality returns on a consistent and risk adjusted basis.”

In the most recent rebalance, risk-targeted funds dominated those that achieved the highest score of five FE Crowns in their first ever rating. Seven Standard Life investment’s MyFolio funds were among those ranked within the top 10% of all funds, including SLI MyFolio Managed Income II, Multi Manager IV and Managed V.

Rob Gleeson, Head of FE Research, said: “Standard Life Investments’ MyFolio funds are by far and away the most successful risk-targeted funds out there, so that’s why they dominated the Crowns for risk-targeted funds.”

Overall, 19 funds achieved a five FE Crown rating at the first time of asking, while 14 saw a reversal in fortunes, gaining five FE Crowns up from a previous one.

find out more about FE Trustnet Ratings:

www.trustnet.com/ratings