Rating Method
What is a Manager Rating?
- How to assess the quality of an investment management firm
which has not been in the business for more than one or two years and
is therefore lacking in sufficient performance data history?
- Having arrived at the conclusion that past performance is no guarantee for future performance, what are the other factors an investor can rely on to make up his mind in selecting a manager?
- How
should an investor react towards an investment house with only a local
sales team, however taking all investment decisions abroad?
Starting with questions like this, which cannot be answered
sufficiently by means of a purely quantitative analysis of historic
performance data, the rating agency TELOS GmbH carries out Manager Ratings of Investment Companies, to offer a great depth of information and transparency especially to investors.
To evaluate in how far an investment manager takes care of its fiduciary duties, the Manager Rating scrutinises (among others) areas like
- implementation of investment decisions
- order processing and trade execution
- implementation of risk management
- the avoidance of conflicts of interest
as well as
- financial and human resources
- product range and client service
- management strategy and controls
and many additional aspects. The aim is to answer the question, whether
the investment company is likely to meet the investor's expectations in
future.
The Manager Rating by TELOS consists of a comprehensive and detailed analysis which aims to identify and locate sources of risk and their potential effects.
Who is evaluated?
TELOS offers the Manager Rating to firms and group entities operating for instance as
- investment firm (not necessarily in the legal setup of a "Kapitalanlagegesellschaft"),
- trust,
- hedge fund manager, or
- "Master-KAG" (with or without its own portfolio management)
in the institutional, retail or private clients business.
The Manager Rating offers an in-depth and independent evaluation of strengths and weaknesses of the asset manager.
The results are being published in the daily press, in financial publications, and on the TELOS website (www.telos.ws).
Further to that, a large number of institutional investors are being informed directly.
What is evaluated?
The TELOS Manager Rating stands out for a qualitative and process
oriented approach which reaches far beyond the traditional -
predominantly quantitative - analysis of historical fund performance
data:
- comprehensive and detailed analysis of the complete
investment firm, taking into account dependencies between corporate
entities, processes, persons, etc.,
- orientation at internationally accepted standards,
- objectivity by strictly limiting the discretion during the evaluation,
- quality assurance integrated within the rating process, continuous product maintenance.
The Criteria
The table below shows how the Manager Rating is structured in general.
| Level 0 | Level 1 | Level 2 |
|---|
| Manager Rating |
Management |
Organisation |
| Team |
| Personnel |
| Policy |
| Clients |
Marketing & Sales |
| Products & Services |
| Client Care |
| Production |
Process |
| Team |
| Operations |
| Quality Management |
| Infrastructure |
IT |
| Supervisory Functions |
For the actual evaluation of an investment manager, TELOS uses a
structure which subdivides the topics of Level 2 further (Level 3,
Level 4, ...).
For example, the Level-2-headline Supervisory Functions comprises Level-3-topics like Risk Management, Compliance, and Audits.
The Rating Scale
| Manager Rating |
|---|
+
1
- | Excellent |
+
2
- | Very good |
+
3
- | Good |
+
4
- | Satisfactory |
+
5
- | Inadequate |
+
6
- | Weak |
|
For each of the criteria listed above (Levels 0–2), there will be
determined an evaluation according to the rating scale shown on the
left; these results are then displayed in the rating report. |
|