FSA believes singling out the top performers based on independent, data-driven criteria can provide a fund house with a valuable distinction among peers.
However, the process has to be clear, transparent and objective. FSA uses historical and forward-looking screens — both quantitative and qualitative methods of selecting the winners.
How it’s done
The first step is done by FE Advisory Asia, FSA’s data partner. Analysts filter the universe of funds in Hong Kong (1326 eligible funds) and Singapore (2723 eligible funds) for alpha, volatility and consistency across 14 categories.
ETFs, passive/tracking funds and funds with no FE Crown rating (less than 3 years track record) have been removed. The time frame is three years to 30 June 2018.
FE then creates two shortlists – one for Hong Kong and a separate one for Singapore.
(In Hong Kong, funds have to be registered for retail sale to be eligible. In Singapore, funds with “Accredited Investor” status are eligible).
The methodology for the shortlists is 100% quantitative, providing an apples-to-apples comparison, according to Luke Ng, senior VP of research at FE Advisory Asia.
Fund selector judges
Next, there is a qualitative overlay. The shortlists are given to independent panels of well-known professionals from Asia’s fund selector community. Hong Kong and Singapore have separate judging panels to reflect the difference in offerings.
Only one question was provided to guide them, and it was forward-looking:
Given this list, which fund within each asset class do you think will perform best over the next 12 months?
The judges’ selections will determine the winners (Platinum and Gold). Winners will be revealed in early January.
Asia fund trends
After compiling the shortlists, the team at FE noticed a few trends that give a snapshot of the regional fund landscape.
In both Hong Kong and Singapore, the three most competitive asset classes, where the scoring was very close among the top performers, were Regional Bond, Regional/Single Country Emerging Market Equity and Global Emerging Market Equity, Ng said.
Across all categories, Hong Kong’s shortlist comprises 128 funds. In Hong Kong the turnover rate was 62%, meaning less than half of the funds from last year’s shortlist managed to get on this year’s shortlist. In Singapore, the turnover rate was 60%.
“It shows that the market has changed significantly since the previous award period,” Ng said.
Looking at individual categories, in Hong Kong the highest turnover was in Sector Equity (80%), meaning eight of the 10 funds in this category on the shortlist were new this year.
Next was US Equity, Regional Bond and Sector Equity with 70%.
In Singapore, the shortlist is made up of 140 funds. Greater China/China Equity, Global Emerging Market Equity and Global Equity categories had the highest turnover (80%).
He added that among the 28 winning funds from last year’s FSA Awards, 17 of them are on the shortlist again this year in Hong Kong. In Singapore, only 12 award winning funds made it on the shortlist.
“Funds with a different style bias that underperformed last year are doing better in this latest period. That’s part of the reason why there is higher turnover versus last year.”
FSA will publish the shortlists, one for Hong Kong and one for Singapore, in parts beginning tomorrow. Winners will be revealed in early January.
