forsyth partners to rate funds every three months and provide A, AA or AAA awards
Schroders and Aberdeen are among the fund groups backing a rival ratings service to S&P Fund Research, due for launch on 1 February.
The service, which will rate funds A, AA and AAA, is being run by multi-manager specialists Forsyth Partners in conjunction with Old Broad Street Research (OBSR).
Invesco Perpetual, Gartmore, M&G and Hendersons are among the other groups which are to support the new ratings system.
It is based on Forsyth's own largely offshore funds ratings service which the group sells to private banks, asset managers and stock brokers. Unlike S&P, it updates its reports on a three-monthly cycle and uses its research to pick funds for its own multimanager portfolios.
The move could result in a high level of competition for S&P, which currently has no serious rivals in the mainstream intermediary-targeted qualitative analysis market.
Forsyth's partner, OBSR, specialises in onshore fund research. Together, the two groups' combined research effort will consist of 18 professionals, three at OBSR and 15 at Forsyth, including Peter Toogood and Paul Forsyth at Forsyth Partners and Richard Romer-Lee and Richard Downs at OBSR.
There is broad support for the venture among large asset managers, which are keen to see competition in the marketplace, particularly if it reduces prices.
Many groups, including Hendersons, Aberdeen and M&G, were involved in a dispute with S&P last year, a story first reported in Investment Week, when the fund rating group hiked its prices by around 40%.
Like S&P, Forsyth-OBSR will charge asset managers for ratings. The Forsyth-OBSR service is initially pricing for the first year at a level to cover costs, resulting in bills of around £30,000 a year for large asset managers. They report bills from S&P having grown to more than £100,000, comprised of an annual fee and a charge for each fund rated.
Although he would not comment on the cost of the two qualitative services, Robert Higginbotham, European retail marketing director at Schroders, said: 'Qualitative research is a useful tool for individual customers and the intermediary market and for too long there has been just one player. Competition should be good for service levels and also on price.
'This is a young, entrepreneurial company with people that understand the funds business taking on a more established player.'
He said that Schroders is attracted to Forsyth-OBSR's ability to understand style as well as be less reliant on quant screens. S&P rules out funds from ratings if they underperform peers consistently.
Higginbotham said that Forsyth-OBSR had to prove to fund groups that it could achieve the brand recognition and respect among intermediaries that is necessary to challenge S&P. That will include winning over groups like Chase de Vere that, at present, will only recommend S&P-rated funds.
Chase told Investment Week it was impressed by the Forsyth-OBSR service and was looking at whether to introduce it alongside S&P's as part of its fund recommendation process.
2019 Survey opens in June
'Necessary steps' taken
Penalty payments and enforcement policy
Fees as low as 0.04%
Client procurement costs ‘unsustainable’