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FE Crown Fund Ratings Methodology

FE Crown Fund Ratings are a quantitative measure covering investment instruments worldwide. Here we describe the methodology behind the ratings and how they can support your investment decisions. 

Crown Ratings should not be used in isolation. We recommend professional advisers seek further research on a fund for consideration of matters beyond performance on the basis of the factors set out within this methodology.  

Please refer to the limitations below for further information. 

FE Crown Fund Ratings enable investors to distinguish between funds that are strongly outperforming their benchmark and those that are not. 

The top 10% of funds will be awarded five FE Crowns, the next 15% receiving four Crowns and each of the remaining three quartiles will be given three, two and one Crown(s) respectively. 

Rebalanced twice a year in February and August, the rating takes into account three key measurements to derive a fund’s performance: alpha, volatility and consistently strong performance. 

FE Crown Fund Ratings can be used by professional advisers as an initial step to screen for the best performing funds in a sector and at a factsheet level are used as part of an adviser’s paper trail to show thorough and rigorous research has been undertaken. 

FE Crown Fund Ratings are quantitative only with no qualitative aspects taken into account within the methodology.

FAQs

Frequently asked questions

FE Crown Fund Ratings are quantitative ratings ranging from one to five designed to help advisers identify funds based on performance in terms of consistency and volatility. 

A single FE Crown Fund Rating reflects the lowest tier, and suggests the fund has failed to meet thresholds on the above terms, while a five FE Crown Fund Rating reflects the highest tier. 

The purpose of FE Crown Fund Ratings is to categorise funds based on performance in terms of the following specific factors: 

  •     stockpicking 
  •     consistency of outperformance against a credible benchmark 
  •     achievement of results at a relatively low volatility 

Funds can achieve good performance as a result of: 

  •     making significant bets on market movements 
  •     sudden bursts of performance, with other periods being indifferent or poor 
  •     taking very high risks 

FE Crown Fund Ratings are not individual fund recommendations, and should not be seen as specific advice, but a quantitative rating to provide a basis for refining and monitoring a list of funds that would be suitable for consideration. 

Due to the focus on alpha, FE Crown Fund Ratings are by definition aimed at the active investor. Tracker-type funds are currently not rated in Australia. 

FE Crown Fund Ratings are not considered General Advice (s766B Corporations Act 2001). Further, they are purely quantitative and backward looking, and, as such, cannot offer any certainty about the future.  

Among others, in order to get a fully rounded view, an investor should also consider: 

  • Qualitative measurements and comments, which look at the quality of the processes by which a fund is managed. 
  • The strength and track record of the fund manager(s) involved in running the fund. 
  • The strength and approach of the asset management group behind the fund in the asset class in which that fund operates. 

FE Crown Fund Ratings apply to all the main FE universes including Australian Managed Investments, Superannuation, Retirement Income and Investment Bonds. 

Twice a year during February and August. 

A score is built based on analysing a fund’s performance over the last three years. The score is made up of three components – alpha, relative volatility, and consistently good performance.  

The Ratings have been enhanced to use more closely-targeted benchmarks where sectors are too diverse, improving the quality of the calculations and removing dependence on the nature and size of fund sectors. 

Broadly speaking, the top scoring 10% of funds in each main asset class will get a five FE Crown Fund Rating, the next 15% four FE Crowns, and each of the remaining 25% tiers will get three, two, and one FE Crown respectively.