By Robert Stock US risk management product company RiskMetrics is to launch a free internet product ...
By Robert Stock
US risk management product company RiskMetrics is to launch a free internet product to enable IFAs and retail investors to compare the risk profiles of different UK Oeics, unit trusts and mutual funds.
RiskGrades will be added within the next six weeks to the www.riskgrades.com website, which was launched in late May.
Currently the website, which can also be accessed through www.Ftyourmoney.com and www.sharepeople.com, only provides a risk measurement product and historical risk analysis for stocks and bonds, or for entire portfolios of mixed asset classes.
Martin Spencer, director of retail products for Europe, said when the fund service is added to RiskGrades later in the summer, it will help IFAs differentiate between funds.
He added: "To differentiate between funds IFAs have to look primarily at returns but this product will allow them to take two funds with the same return over the same period and for the first time compare the risks that the fund managers took to achieve those returns."
Spencer said it would also be one of the first comparative risk measurement tools covering funds to become freely available, because it was a quantitative rather than qualitative measure.
RiskMetrics, which is owned by JP Morgan and Reuters, said RiskGrades calculates comparative risk ratings across asset classes on a scale of 0 to 1,000 with base currency such as sterling or dollar deposits rated as 0 and 1,000 indicating a high risk investment vehicle such as an internet IPO.
The risk ratings are based on a calculation of how much variation there has been in a particular asset's price, with the most recent historical performances carrying the greatest importance.
The volatility is then compared to that of a basket of global equities and the ratio of these gives the final measurement. Like stock prices, the risk measurement changes every day.
On 23 May the FTSE 100 had a risk rating of 113 compared to 112 for the Eurostoxx 50 and 309 for the Nasdaq. Marks & Spencer and Barclays were both rated at 220, whereas British Airways was rated at 307 and Baltimore Technologies at 644.
The product also contains options allowing investors to model the possible extent of losses their current risk ratings could generate. It allows investors, who apply for a user name and password the first time they log on, to compare the risk rating of an entire portfolio against benchmark groupings.
There is access to an online help centre and an online tutorial to take IFAs and investors through the theory and function of the product.
Spencer said: "The model we use is the same model we have been supplying institutional markets with since 1994. There are some other companies that do the same but we are the first to make it available to the retail market. The concept is to make it accessible and understandable to the man in the street and the IFA in the high street."
Two global vehicles
'Further plug advice gap'
Must appoint separate CEOs and boards
Advisers do come out well
Will report to Mark Till