Ratings - Morningstar and Trustnet

ChilliBob

Guys,
How much attention do you pay to the ratings on these two sites?

I'm taking them into consideration, but more from the perspective of a one star or something suggests caution and a 4-5 star is worthy of more detailed analysis.

It doesn't play a huge role in my decision making, just curious what others think of them really. 

Linton

I would only use fund ratings as a tie breaker of lower importance than past performance, which in itself is not a primary consideration.

Prism

Not a great deal. I have selected both 1* and 5* funds in the past without any worries. The ratings take little notice of risk level and are all about recent performance.

MaxiRobriguez

If anything I'm more likely to go with a 1* rating than a 5*.

ChilliBob

Interesting, thanks Linton. I get your point about past performance of the given fund, what's your view about past performance of the given manager?

When I used to work in alt assets performance of given managers over time was a pretty strong factor in performance of a new fund. I. E. Strong track record vs first time manager or first time in that strategy for that manager. 

By fund manager here I mean the actual firm, I guess one can go further and look to the actual individuals running the fund too - which I guess is where something like Citiwire with their manager ratings (person) are interesting too

ChilliBob

Thanks Prism and Max, left my response to Linton sitting there for a while before hitting lost comment, d'oh!

I know they're supposed to be taken with a pinch of salt, I should look into both ratings methodologies to see what they actually do! 

Linton

ChilliBob said:

Interesting, thanks Linton. I get your point about past performance of the given fund, what's your view about past performance of the given manager?

When I used to work in alt assets performance of given managers over time was a pretty strong factor in performance of a new fund. I. E. Strong track record vs first time manager or first time in that strategy for that manager. 

By fund manager here I mean the actual firm, I guess one can go further and look to the actual individuals running the fund too - which I guess is where something like Citiwire with their manager ratings (person) are interesting too

I  believe that performance is primarily determined by the types of assets the fund invests in. The past performance of the fund management company is only relevent in so far as there is a house style which strongly influences the asset choice.  This is particularly obvious with Baillie Gifford funds.  I primarily choose funds on the sector/geography/size, value vs growth style allocations of the underlying investments and how those allocations would fit into the overall portfolio.

ChilliBob

Thanks, presumably when you do so though you're considering the ability of the manager to execute the strategy as pretty key to this? As whatever holdings they have now will obviously change over time, so confidence in their ability to screen and select must be a critical factor

Linton

ChilliBob said:

Thanks, presumably when you do so though you're considering the ability of the manager to execute the strategy as pretty key to this? As whatever holdings they have now will obviously change over time, so confidence in their ability to screen and select must be a critical factor

I assume the fund will carry on in the same way as it has previously with minor housekeeping changes to the particular holdings. I only expect the manager to avoid the rubbish and if he finds a golden egg, great, but I dont rely on it.  For this reason I tend to avoid funds with only a small number of underlying holdings.  I dont want to see a switch in course.

ChilliBob

That makes sense. Thanks for the insight. I know everyone's approach is different but it's interesting to learn others processes. 

Thrugelmir

Never look at them.  The best time to buy investment trusts is often when they are totally put of favour. Change of manager, distribution policy or introduction of a discount control mechanism for example can reap worthwhile medium term returns for minimal risk.