Defaqto is launching a new rating to help advisers assess funds and portfolios that have yet to build up an established performance history.
The Defaqto Foundation Rating will be available to funds and portfolios from launch and throughout their first five years.
The new rating will offer an independent assessment during the earlier stages of the funds’ development, the business said. It said it will provide an independent assessment of the potential (and often overlooked) opportunities newer funds can offer.
It is the first rating to combine Defaqto and RSMR expertise following Defaqto’s acquisition of the fund ratings and research business, in a deal announced in July 2024.
Andy Parsons, head of insight at Defaqto, said: “There is a clear gap in the market when it comes to newer funds and portfolios that don't yet have an established performance track record.
“The Foundation Rating allows us to look beyond the performance history that simply doesn’t exist at this stage. By combining Defaqto’s structured quantitative assessment with RSMR’s qualitative research and due diligence expertise, we can give advisers another independent source of information when they are considering a newer proposition.”
He said the assessment begins with information provided by the asset manager, which is evaluated using a structured Defaqto scoring methodology, then combined with qualitative appraisal from RSMR, drawing on its existing due diligence of asset management groups.
The assessment considers factors that could support the future success of a fund or portfolio, including the experience and stability of the investment team, investment processes, systems and controls. It does not seek to predict or guarantee future performance.
The Foundation Rating operates on a pass/fail basis and, for those more than a year old, the fund or portfolio performance history (risk-adjusted performance) is progressively incorporated into the assessment.
Stuart Ryan, head of research at RSMR, said: “We regularly speak to asset managers with new strategies that they are trying to establish. Our role isn’t to predict that a new fund will succeed, because there are never any guarantees. What we can do is use our experience and due diligence to assess whether the right foundations are in place, looking at the people behind it, their experience, the investment process and the wider asset management business.”