In relation to a fund, what is a Crown Rating?
What are FE Crown Ratings?
FE Crown Ratings are quantitative ratings ranging from 1-5 designed to help investors identify funds which have displayed superior performance in terms of stockpicking, consistency and risk control.
A single FE Crown Rating reflects the lowest tier, and suggests the fund has failed to impress on the above terms, while a five FE Crown Rating reflects the highest tier and identifies a fund which we think is of superior quality.
Where are FE Crown Ratings applicable?
FE Crown Ratings apply to all the main FE universes including unit trusts & OEICs, investment trusts, life funds, pension funds and offshore funds
How are FE Crown Ratings calculated?
We build up a score based on analysing a fund's performance over the last 3 years. The score is made up of three components - alpha, relative volatility, and consistently good performance.
Previously we have used a fund's sector average as the basis of calculating these numbers. The latest FE Crown Ratings use more closely-targeted benchmarks, improving the quality of the calculations, and removing dependence on the nature and size of fund sectors.
How broad are each of the five tiers?
Broadly speaking, the top scoring ten percent of funds in each main asset class will get a 5 FE Crown Rating, the next 15 per cent 4 FE Crowns, and each of the remaining 25 per cent tiers will get 3, 2, and 1 FE Crowns respectively.
Has the FE Crown Rating system changed?
Yes. Previously there were only three tiers, and the best funds were graded with a Triple Crown Rating. This did not offer sufficient granularity, however, so we decided to increase the number of tiers into which the rating is split - this is particularly important given that these ratings are meant to show bad funds, as well as good ones, so a Single Crown Rating should only be given to the weakest funds.
How often are FE Crown Ratings updated?
Every 6 months. They will be rebalanced on the 1st of January and 1st of July each year.