Riskgrade accurate?

thewizz2009

Hi

How accurate is Riskgrade in judging the risk of a Fund. Just looking at HL mm funds as an example, specifically the special situations and balanced, with Riskgrades of 31 & 39 respectively. Just I would have though the balanced would have been lower risk, as HL says themselves the Spec Sit is designed to be more risky and balanced 'safer'.

I Guess as there are multi manager, it’s an aggregate of the funds it holds, but is Riskgrade a suitable judge for portfolio risk?

nrsql

Maybe it's including the multi-fund fees in the risk assessment?

thewizz2009

Could be, balanced has TER of 1.9% and 32 holdings, spec sit 2.03% and 28 respectively

Is it that in good times, the spec sit will perform better, but worse in bad and so over the long term protect capital more, than the ok performance in bad and good times of the balanced fund, does that make sense?

So is Riskgrade only an indicator in the long term of risk

Chrismaths

Riskgrade is nonsense. Ignore it.

dunstonh

It does appear to be rather inconsistent.

carnet

It's just volatility - and you can actually make this work for you -through pound cost averaging.

thewizz2009

So is there any accurate measure of risk for funds, more than just broad categorization by there investment area, or is that good enough generally

Chrismaths

It's just volatility

No it's not. The volatility is higher on the sp sits, but the riskgrade is lower. I think there is some calculation done relative to the sector/market, but I never bothered to look, because qv. it's nonsense.

If you want a proxy for risk that is easily available, it's had to go past volatility. It is far from perfect, and leaves out lots of types of risk, but it's a decent starting point.