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Morningstar rating analysis of South African domiciled asset managers

11 July 2016 Matthew Mellors, Matthew Vass Morningstar
Matthew Mellors from Morningstar.

Matthew Mellors from Morningstar.

Matthew Vass from Morningstar.

Matthew Vass from Morningstar.

The Morningstar South African Rating Analysis of unit trusts is designed to compare managed fund ranges across South African asset managers by aggregating their Morningstar Ratings. The research format is calculated on a quarterly basis. It provides a quantitative assessment of the risk-adjusted return of all South African domiciled unit trusts carrying a Morningstar Rating.

The Morningstar Rating for funds, often called the “Star Rating”, debuted in 1985 and was quickly embraced by investors. The Morningstar Rating is a quantitative assessment of a fund’s past performance and is measured from a minimum of one to a maximum of five stars. The methodology rates funds based on an enhanced Morningstar Risk-Adjusted Return measure that takes both return and risk into account.

The Morningstar South African Rating Analysis aggregates the rankings of providers by brand name and thus provides a useful insight into the strengths and weaknesses of a firm’s fund range. It is, however, not designed as a forward-looking tool and does not indicate the future positioning of asset managers. This follows the line that the Morningstar Rating is intended for use as the first step in the fund evaluation process.

The Morningstar South African Rating Analysis is a quantitative calculation. It delivers an Overall-Weighted and an Asset-Weighted ranking of asset managers and their rated range of South African domiciled funds. The rankings also show the percentage of 4 and 5 Star rated funds across all rated funds for an asset manager.

The rankings by Overall-Weighted and Asset-Weighted Ratings both have their merits. The ranking by Overall-Weighted Morningstar Rating mirrors the average quality of the overall fund range given that all funds are weighted equally. The Asset-Weighted ranking gives an assessment of an asset manager’s weakness and strength, in light of how investors allocated assets between available investment options within the fund range.

The Morningstar Rating Analysis of Unit Trusts includes all South African retail domiciled funds with a Morningstar Rating. This implies that funds belonging to several broad categories are excluded since they are not eligible for a Morningstar Rating. This includes, amongst others, alternative funds, money market funds and commodity funds.

Link to: Morningstar Rating Methodology

The Morningstar South African Rating Analysis includes 2 tables updated quarterly.

Table 1

Top Asset Managers (minimum ZAR 5 Billion) in South Africa

Sorted by Equal-Weighted Rating

Table 1 shows the top asset managers in South Africa, ranked by Equal-Weighted Rating. Assets include rated South African domiciled Unit Trusts. The column Equal-Weighted Rating shows the simple arithmetic mean of the overall Morningstar Rating.

Table 1: shows the top asset managers in South Africa, ranked by Equal-Weighted Rating. Assets include rated South African domiciled unit trusts. The column Equal-Weighted Rating shows the simple arithmetic mean of the overall Morningstar Rating. The column at the far right shows the percentage of assets sitting in 4 and 5 Star rated funds as a percentage of total rated assets.

Table 2

Table 2 shows the top asset managers in South Africa, ranked by Asset-Weighted Rating. Assets include rated South African domiciled Unit Trusts. The columns showing the Asset-Weighted Rating represent the asset-weighted Morningstar Rating average by the broad categories of equity, fixed income and allocation.

Table 2 shows the top asset managers in South Africa, ranked by Asset-Weighted Rating. Assets include rated South African domiciled unit trusts. The columns showing the Asset-Weighted Rating represent the asset-weighted Morningstar Rating average by the broad categories of equity, fixed income and allocation. The column at the far right shows the percentage of assets sitting in 4 and 5 Star rated funds as a percentage of total rated assets.

For both tables the column at the far right shows the percentage of assets sitting in 4 and 5 Star rated funds as a percentage of total rated assets.

 

 

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