For the first time Standard Poor's is allowing investment houses leeway to pick which funds they ...
For the first time Standard Poor's is allowing investment houses leeway to pick which funds they want to put forward for ratings.
Under the previous business model a group had to sign up to a package which involved it having all its funds judged. S&P has now decided to allow groups to choose whether or not to have less mainstream portfolios rated.
By splitting its fund classification into what it calls non-elective and elective, the ratings agency has reduced the number of products that groups are obliged to have analysed as part of the S&P package.
Of the 74 peer groups into which S&P marshals funds, 17 are now classed as non-elective, leaving groups to decide on the commercial advantage of rankings for portfolios in the remaining 54 elective areas.
The non-elective peer groups include major equity peer groups, such as UK Growth and UK Income, Europe ex-UK, US, Japan and global, plus mainstream fixed income sectors.
The elective, or non-core, definition incorporates smaller company funds, Asia Pacific and emerging market, trackers, more esoteric bond sectors such as overseas high yield, and the majority of specialist products, including single non G7 country and single-sector portfolios.
Funds in small IMA sectors such as UK Equity & Bond Income and Europe including UK will also drop out of the S&P's core definition.
The ratings agency calculates the amount of work involved for each group and the number of funds it will have to rate, and charges an annual fee based on that. Groups are able to reduce this fee if they decide against having their non-core funds rated.
Ratings for individual elective funds will be charged at a premium to core portfolios under the amended system.
S&P completed the changes at the end of last year and its account managers have been discussing the adapted system with groups over the last few months. It is now in the process of rolling out its modified classification structure to the market as groups reach their annual renewal date for fund ratings.
Markets and strategic development director at S&P Paul Barnes said the changes are not a deliberate measure to maintain S&P's competitive edge against fund rating newcomers such as Forsyth-Old Broad Street.
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