Rating methodology
Financial rating
In our ranking, a top fund should achieve a higher value as a result of its fund management, outperformance in comparison to a representative benchmark and above average performance in bull and bear markets. In addition, a top fund should be able to obtain higher returns for the investment risks it undertakes and should offer an attractive value for the investor’s money from a cost perspective.
- Fund Management Skills
By applying alpha measures we are interested in the ability of active fund management to increase returns above those that are purely a reward for bearing market risk, i.e the added value of managed funds. - Cumulative Returns
We perform an assessment of the fund’s performance measured by its cumulative returns over a given period of time in comparison to our global benchmark (MSCI World), the fund’s benchmark (or other representative e.g. regional benchmark) and our peergroup of sustainable funds. - Consistency
We look at the fund’s returns over various time periods (bull, bear markets) and evaluate the fund’s consistency in performance. We analyze the fund's strengths and weaknesses in performing under different market conditions. - Risk
We combine short-term (1Y) risk-adjusted performance with long-term (normally 5Y) risk-adjusted performance to get an overall risk-return profile of the fund. We report on statistical measures for the fund's volatility and evaluate its risk premium. - Costs
We report on and compare the fund's management fee as well as its total expense ratio for institutional investors in comparison to other funds of the same region and asset class.
Sustainable rating
A leading SRI fund is characterized by its commitment to sustainability, i.e. comprehensive social and environmental company research which has to be reflected in the fund’s portfolio that includes companies with excellent stakeholder relationships. In addition, a top fund actively pursues engagement opportunities and shows a high level of transparency for investors.
- Research Quality
We evaluate the fund’s research quality by analyzing the research concept (e.g. application of sustainable selection criteria, company rating procedure and validation of research results and methodology) and research effort (e.g. experience in the field of SRI, frequency of data update, quality of company analyses). - Portfolio Quality
We analyze the portfolio’s social and environmental performance using sustainable company ratings from SiRi* for the following categories: “Business Ethics”, “Community”, “Suppliers”, “Corporate Governance”, “Employees” and “Environment”. In addition, we look at controversial business activities (e.g. human rights violations or severe environmental damages) as well as at the fund’s environmental footprint by analyzing its industry sector allocation. - Engagement
We look at how the fund management can influence directly CSR (corporate social responsibility) through company dialogue, proxy voting and shareholder resolutions. With donations and social investments (e.g. community development) we also consider two other (not CSR related) forms of engagement in this category. - Transparency
Together with publicly available documentation for investors, we evaluate the fund management’s willingness to provide information about specific questions relevant to SRI (e.g. comprehensive investment philosophy, transparency of sustainable selection criteria or disclosure of portfolio holdings).
*) Sustainable Investment Research International Group
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