Independent recognition for funds and MPS portfolios building their track record
A new fund or MPS portfolio may have experienced people, a robust investment process and a strong proposition. What it cannot have on day one is a long-term performance history.
The Defaqto Foundation Rating provides an independent assessment of newer funds and MPS portfolios during the period before they have sufficient track record to qualify for established Defaqto Diamond Ratings and/or a full RSMR assessment.
For fund and MPS portfolio managersFor fund and MPS portfolio managers, it provides independent evidence of the foundations behind a newer fund or MPS portfolio while its performance history is still being built. |
For financial advisersFor advisers and fund and MPS portfolio selectors, it provides a source of independent evidence when assessing investments without a long performance history. |
What does a Foundation Rating mean?
The Foundation Rating is a pass/fail rating. A fund or MPS portfolio only earns the rating if it meets the required Defaqto assessment threshold.
During the earliest stage of a fund or MPS portfolio’s life, the assessment focuses on the characteristics that can be evaluated before a meaningful performance history exists.
These fall into three areas:
- Investors: assessing factors including seed capital and investor diversification.
- People: looking at the experience, depth and stability of the investment team.
- Process: assessing areas including investment research, decision-making, liquidity and risk management.
Up to 28 individual criteria can contribute to the assessment.
"The rating combines Defaqto’s structured methodology with RSMR’s qualitative investment research and due diligence expertise, bringing together two complementary approaches to assessing investment propositions."
A rating that evolves as the fund develops
The Foundation Rating is designed to evolve alongside the proposition.
Initially, the assessment is based on the underlying foundations of the fund or MPS portfolio.
Once performance history becomes available, risk-adjusted performance is progressively incorporated into the methodology and takes on increasing importance as the track record grows.
This creates an assessment appropriate to the stage the fund or MPS portfolio has reached, through to the point at which it can qualify for an established Defaqto Diamond Rating and/or RSMR assessment.
For fund and MPS portfolio managers
Build credibility before a long track record exists
The early years of a fund or MPS portfolio can create a challenge. Advisers and selectors want evidence. But some of the evidence traditionally used to assess investment propositions only exists after several years.
A Foundation Rating gives you an independent way to demonstrate that the people, processes and wider foundations behind the proposition have met Defaqto’s required standard.
Licensed fund and MPS portfolio managers can use the Foundation Rating badge across relevant marketing and communications, supported by information explaining what the rating represents.
Rated propositions will also be introduced into Defaqto Engage, supporting discovery and research by financial advisers.
Raising awareness with advisers
Alongside this, Defaqto and RSMR will educate advisers about how newer funds and MPS portfolios can be assessed, using our established adviser communications and content, with further educational activity planned as the rating develops.
For financial advisers
What should I take from the badge?
Seeing a Foundation Rating does not mean Defaqto or RSMR is predicting that a fund or MPS portfolio will outperform, and it is not a substitute for suitability assessment or professional judgement.
It means something more specific: the fund or MPS portfolio has undergone an independent assessment appropriate to its stage of development and has met the standards required to earn the rating.
For a proposition without the performance history of a more established fund or MPS portfolio, that gives you an additional, consistent source of evidence to use as part of your research and selection process.
What can we do for you?
Call us today on 01844 295 546 or email sales@defaqto.com and let's start a conversation.
