Chelsea Financial and Albemarle join forces to launch fund ratings service
Chelsea Financial Services and Albemarle Street Partners are to launch a fund rating service early next year, targeting consumers and rivalling a number of existing agencies.
The 50/50 joint venture – called FundCalibre – will be based on Albemarle’s fund screening tool AlphaQuest, the results of which will be combined with Chelsea’s qualitative analysis to create a list of rated funds.
FundCalibre will issue a single ‘Elite Fund’ rating to portfolios that pass the screening process, with the list reviewed annually, although all funds will be monitored on a monthly basis.
Headed up by five directors – Albemarle’s three founding partners Dan Kemp, Clive Hale and Sam Liddle, as well as Chelsea’s managing director Darius McDermott (pictured) and research director Juliet Schooling Latter – the new venture is combining some of the most experienced fund selectors in the business.
The AlphaQuest screening process seeks to overcome the problems of funds whose style biases mean they are often inconsistent in generating alpha. The tool calculates the volatility of a manager’s historic alpha generation to estimate the scope, and the likelihood, of future outperformance.
Only funds which have at least a 60% probability of producing alpha over the next 12-month period will make the grade.
Chelsea’s qualitative work will then be overlaid across the results to produce a range of Elite Funds.
McDermott said: “We anticipate that no more than 10% of the fund market will make it onto the buy list. We aim to create a ratings agency with a difference, which is easy to understand for consumers and focuses on predictability of future returns.”
Crucially, fund groups will not be able to pay a fee for a rating, in an effort to ensure a fair and transparent selection process. But they will be able to buy a licence to include the rating in their marketing material.
The new venture is set to launch in January, subject to FCA approval, and has already secured support from a number of fund groups, including Artemis and Schroders.
Dick Turpin, head of asset gathering at Artemis, said: “Artemis is delighted to be a launch partner for FundCalibre. This is an excellent initiative, at a highly appropriate time for investors seeking helpful research with their analysis and ultimate investment decisions. The use of the AlphaQuest analytical tool provides a clear guide to the predictability of future returns.”
Peter Beckett, head of international marketing at Schroders, added: “We like the predictive nature of the AlphaQuest quantitative screening tool, coupled with Chelsea’s proven qualitative analysis, which then leads to a simple Elite rating.
“The transparency and independence of FundCalibre should prove a winning combination for investors and intermediaries wanting to validate their fund choices.”