A well trodden path to victory

Congrats to all the winners etc. but really, these awards should be renamed 'FundSource Fund Manager (That Pays FundSource The Most) of the Year Awards'. How else to explain not a single award or nomination for Milford or Pie Funds? It's a joke.

Have to agree with Anon here. Some honourable mentions were clearly missed.

Don't you feel that this sort of self stroking event is rather yesterday now? They remind me of an ecclesiastical revival meeting! Who are fundsource to our investing public? Will this ceremony return confidence and trust to the investing public? What is the meaning behind them and who is to say this body of judges is correct? Why bother anyway...but I guess OnePath can believe they have now returned investor feelgood - and then along comes Ross Asset Management.

I’m sorry, but am I the only one that recalls the DYF/RIF? Apparently it only takes one year of above average returns and a lot of sponsorship to be the best fund manager in NZ. Nice!

I reckon that the industry needs to move away from this form of self adulation, and start working towards the reinstatement of consumer confidence.

Whilst I'm unsure of the exact criteria for eligibility, it would be another blow to the industry’s credibility if consumers discovered that eligibility was due to some form of undisclosed sponsorship, subscription or payment.

Elevation Capital as a finalist - ohhh man, they really are sinking to the bottom of the barrel! I agree with Anon - I've watched with great interest Mike Taylor from Pie - incredible there is not a mention.

Guys
You do need to put your cynics hats away on this. Things like sponsorships aren't part of the process.
It is a good question about whether there should be awards like this. My view is yes. It is a good idea to recognise funds and managers which are doing a good job. Wouldn't you rather know about and promote these sorts of funds as opposed to Ross Asset Management and its DIMS?


Here is what FundSource to say on the process.


The structure of the Awards process reflects FundSource’s broad desire to;
a) ensure the Awards criteria are understood by the target audience (members of the public who may use the Awards in the selection of managed funds) and,
b) ensure a high level of transparency of the Awards judging process to maximise objectivity, clarity and understanding of the Awards process.

Fund Manager of the Year – Selection Process
All NZ based funds management companies that have retail investment funds promoted to NZ based investors are considered for the Fund Manager of the Year nominations. A range of qualitative screens are applied to each Fund Manager to generate a nominee list.
The nominee list is then constructed containing all fund managers who have passed the range of qualitative criteria in the nominee selection process.
Quantitative screens based on information as at 30 June 2012 are then used to select the eventual Fund Manager of the Year Award winner, from the nominee list. Selection of the Fund Manager of the Year is derived from a performance based process that aims to fairly represent the achievement of each fund manager on behalf of its clients.
However, where a manager does not have a minimum 3-year history for a fund in any category, they will receive a zero performance score for that category.


KiwiSaver Manager of the Year – Selection Process
All NZ based funds management companies that have Diversified KiwiSaver funds are considered for the KiwiSaver Manager of the Year nominations and awards. A range of qualitative screens is applied to each KiwiSaver Manager to generate a nominee list.
The nominee list is then constructed containing all KiwiSaver managers who have passed the range of qualitative criteria in the nominee selection process.
Quantitative screens based on information as at 30 June 2012 are then used to select the eventual KiwiSaver Manager of the Year Award winner, from the nominee list. Selection of the KiwiSaver Manager of the Year is derived from a performance-based process that aims to fairly represent the achievement of each fund manager on behalf of its members.
The performance calculation stages are:

1. A representative fund is chosen for each KiwiSaver manager across each of the three mainstream diversified fund categories. The fund chosen, in each fund category for each manager, will be the most representative fund offered by that KiwiSaver manager and comparable across managers.
2. Each fund’s quantitative Fund rating for the three year period to 30 June 2012 are collated.
3. Where a manager does not have a minimum 3-year history for a fund in any category, they will receive a zero performance score for that category.
4. The following weights are applied to each of these average performance calculations:

• Conservative 33.3%
• Balanced 33.3%
• Growth 33.3%



Fund Manager of the Year Sector Awards – Selection Process

New Zealand’s funds management industry has nearly 300 open-end funds covering a wide diversity of investment portfolio types and objectives delivered under several legal structures. FundSource’s Fund Manager of the Year - Sector Awards research process groups these available funds into their relevant investment sector categories.
All retail NZ based fund managers and their funds are considered for Sector Award nominations. A range of qualitative screens are applied to each sector to generate a nominee list. The funds that successfully pass the screening process are then analysed on a performance-based approach.
Quantitative screens based on information as at 30 June 2012 are then used to select the eventual Sector Award winners, from the nominee list. First of all the funds are screened based on their quantitative star rating from the FundSource monthly performance tables for 30 June 2012. Funds with three or more stars go through to the last screen. The fund with the highest average quantitative Fund rating will be the fund sector winner.

All of the above screens are embedded within FundSource’s normal fund research process, several of these forming key hurdles required by a fund to attain FundSource’s recommended or better qualitative fund rating.

Re Independent Observer: I think you should ask FundSource what (exactly) the criteria are, but it's interesting to note that some finalists and winners in the fund categories only had two or three star ratings from FundSource, so clearly the awards are not just based on good fund management!

Completely agree with anon..these awards are a joke and always have been.
Who remembers Armstrong Jones Fund Manager of the decade..well they are gone.
In a true contest half the winners would be ETFs.
It would be funny but it's bad for the public's view of the industry seeing former CDO providers winning awards like this.

To "ensure a high level of transparency of the Awards" it would be interesting to understand what "range of qualitative screens" were "applied to each Fund Manager to generate a nominee list".

In 2009, ING was given two fund manager-of-the-year-awards, from Morningstar and Fund Source. The awards “recognise the calibre of the team,” said one ING executive (now no longer there).

Nowhere was there a mention of the two frozen funds that ING had driven into the ground. They had simply been erased, as if they had never existed.

But a year and a half later, a news headline told a different story about ING’s “calibre”—“Report exposes frozen fund flaws—a lack of expertise.”

This followed a detailed survey by Professor Robin Grieves of ING’s total lack of competence (if anyone thinks that is an exaggeration, read the report. Its risk management was zero).

Grieves findings made a mockery of the awards.

The industry itself appears able to live with these crass contradictions. Which is a commentary in itself.

Worse: awards seem to be used as substitutes for what is badly missing in the NZ financial media—proper analysis.

What a sad bunch of joy killers. I'm no great lover of OnePath, personally withdrawing $200m+ of client funds from them but really, this is "reds under the beds" and "tall poppy" talk.

Take a look at yourselves. Especially those cowards that don't identify yourselves. Apart from side swiping from the shadows, what have you ever achieved in life?

I personally applaud anyone that picks themselves up from adversity and gets back to the top.

By the way, the CDO's didn't just sell themselves. Some of you no doubt were fooled just like OnePath, ANZ and the rest of the world.

Brent, my understanding is that fund managers used to have to pay many thousands of dollars to Fundsource (and Morningstar) to get their funds 'researched' in order to be considered for these awards. Does anyone know if that is still correct?

If it is, it may explain why there was no mention of 'PIE' or Milford. It may have been uneconomic for them to pay fees to Fundsource for the privilege of being 'researched' (or they may just have not been willing to as a matter of principle).

I write on behalf of Morningstar in response to the comments from Sceptic. Fund managers do not pay for participation in the Morningstar Awards (including the overall Fund Manager of the Year). These Awards are determined by our fund research analysts on the basis of qualitative and quantitative research. Once the Award winners have been announced, if a fund manager wishes to license the right to publicise the fact that they have been a winner, they are able to do so. (To reiterate, Morningstar never has and does not charge or accept payment from fund managers for undertaking analyst research.)

Oh, oh, Mr Milner. There you go again. The CDO trap was there to see. And so many did. That is, those who wanted to look.

Let us talk. Email me (if you want to) at sburnett@gmx.de.

Agree with Simon..I had at least two articles in the Herald saying cdos were suss years before they imploded,same with finance co debentures but also warned against 5 of the last 3 recessions so not perfect either and yes still working lol

That's right. Brent warned in mid 2005, three months before ING even set up the Regular Income Fund, that a savage CDO cliff-risk potential existed.

In April 2006, he again warned about the sudden-death (my words) nature of CDOs.

Losses of between just three and eight per cent (depending on tranche sizes) were enough to wipe out entirely ING's triple-B tranches.

Brent's was the result of the sort of research that apparently nobody at either ING or ANZ carried out.

At the times both his articles were written, the Financial Times and other financial media were studded with red flags.

The experts that missed it all just didn't bother googling "CDO" or reading the business press--pretty basic stuff, I would have thought.

But what do I know? I was just a retail customer of ANZ who thought it knew what it was doing.

That’s correct. Brent wrote one story in mid 2005 before ING had even set up the Diversified Yield Fund in which he warned of the high cliff-risk potential of CDOs.

In April 2006, he delivered a stronger warning about the risk of losing everything in the event of even a small downturn.

This, of course, is what happened.

His articles were a result of the sort of research that ING and ANZ should have done but apparently did not.

Why a high-street retail bank did not find out some basic facts about the perils of CDOs is beyond me.

Red flags were being hung out by the Financial Times and other financial press years before trouble struck (I can provide chapter and verse if requested).

Dear Phillip (from Morningstar). It was encouraging to read that you do not charge fund managers for researching their products or for entering your own awards competition.

Just to make absolutely sure that I don't get confused (again) would you mind confirming that you research ALL the managed funds in NZ(including 'PIE' and Milford) or is it just the larger funds (and fund managers)?

Also, there hasn't been a response from FundSource (yet) so are you aware whether they follow the same practice as you of not charging fund managers to research their products (and enter their competitions)?

Many thanks,

Mr Sceptic(al)

Brent - yes some of us remember the fund manager of the decade award that Armstrong Jones received however it would appear you have forgotten that they have not gone...but rebranded as ING and now Onepath.

In terms of CDOs, well that was an accident waiting to happen and it is of no surprise the chap who launched the fund at ING left well before it hit the fan. I was under considerable pressure to launch a fund to compete with ING at the time and respectfully declined.

Hi Andy,I meant the name and most of the people had gone,especially in ozzie. I wrote a note for clients saying that the award was ridiculous and aj got bell gully to stop me publishing.They were a truly great firm to deal with !

Re Sceptic @ 11.44: Yes, FundSource charges managers for research. Managers with more than 1 fund and more than $100m FUM pay $20K p.a.

And fund managers winning the sector awards this year pay $10,000 for the 'privilege' of advertising the fact. The overall winner pays $25K for this privilege.

I leave it to you to decide whether managers refusing to pay would be given awards, regardless of how good their performance is.

In response to Mr Sceptic(al): we do undertake research on Brook, Devon, Elevation, Fisher, Harbour, Milford, Mint, and Pathfinder, as well as the institutional shops. I think that represents a strong commitment to ensuring that our clients have an independent view on a broad spectrum of the options available in the market. We haven't to date undertaken research on PIE Funds Management - because we've only had one enquiry from our clients about that firm. (I can't comment on FundSource's business or research models.)

Thank you for that Anon @ 2.10.

That confirms what a learned friend who knows something of these matters had said.

If you are correct, we have FundSource charging to research funds and then charging fund managers again(those with deep pockets who are willing to pay FundSource's fees)to allow them advertise that they have won this award.

This award is therefore rather dubious if it only includes those funds that are willing to pay to be researched.

Other fund managers like 'PIE', Milford,Diversified, Elevation etc. may not have been willing (or able) to afford to pay FundSource's fees and therefore this competition is farcical.

However, it will allow OnePath to promote themselves to advisers (and the public) as being the best overall fund manager in New Zealand.

Some advisers may be able to see through this charade but, unfortunately, the public are likely to be fooled by it.

To their credit, Morningstar have reassured us that they do not charge fees to research anyone's funds and therefore I believe they run a more credible competition.

I note that FundSource have not commmented yet but they must surely be aware of this discussion.

Perhaps they would be willing to respond?

Have a lovely day everyone. Summer is on its way!

Mr Sceptic

As an NZX shareholder I would like to see the NZX ditch FundSource as over the years, in my view, it has been a source of embarrassment more than anything else. And yes lovely weather Mr Sceptic.

Disappointing to see the kiwi "tall poppy syndrome"in full swing.

I was at the FundSource awards evening (unlike every single research above) and thought it was a great evening which paid tribute to winners of their awards according to their criteria.all contenders knew the criteria and we all turned up winners, finalists or losers.

NZX have indicated that they are committed to turning the FS brand around and they have started extremely well.

Shareholders should be delighted with effort, good on them. This effort will not be enough for some who prefer to moan and criticise, regrettable and pretty pathetic from those who would benefit our capital markets much more if they looked at the glass as half full, rather than empty and half chipped..get a life and well done to the winners OnePath included.

Dear Mr 'you guys need prozac'.

Not wishing to sound cynic(al :-) but I don't suppose you would be a fund manager, employee of Fundsource or NZX, would you?

If a fund manager, were you one of the winners?

Please try not to 'get your knickers in a twist' over this or you might be needing that Prozac yourself! :-)

All I want to ensure is fairness and transparency in these competitions and awards.

If FundSource are researching ALL fund managers (without their having to pay them a fee) then that's fine.

However, if they insist that fund managers pay them a fee to be researched and then only enter them in their competition, then it gives the public (and some advisers) the impression that their winner is the best in New Zealand.

However, there may well be others who are better but are not prepared to pay to enter.

All FundSouce have to do to clear up this mystery is to confirm that (like Morningstar) they don't charge in this regard.

Like Brent Sheather I am also an NZX shareholder. Despite that, I prefer a 'fair' competition whereby the best fund manager wins (and not just one of those who are prepared to pay).

Still raining today.

Mr Al Cynic

P.S. I suspect many of us might enjoy a dose of Viagra rather than Prozac nowadays - but you might prefer the latter! :-)

To bring some balance, my understanding is that fund managers pay all research houses in "connection with" research. They may not pay "for" the research but they must pay "for the right to use" the research.... and that contract is signed before the research will be done.... Research is no good for the manager if they can't "use" it.... So legalistically speaking I agree with Morningstar - fund managers don't pay "for" research.... but if the manager must sign and pay for the "right to use" research, I think in the real world this is payment for research.... I am not picking on Morningstar, my understanding is that the same applies to Fundsource and Lonsec. If we don't have fund managers paying that is all fine, but someone will have to pay the cost shortfall so expect research subscription rates to go up to make up .... Payment is not necessarily the problem, it is lack of clarity around the payment that is the problem.

Hi Yoda, not quite right you are.

Morningstar doesn't charge managers for the research, but FundSource does. The research done by Morningstar is useful to the manager in that financial advisers and other users can see Morningstar's recommendations even if the manager doesn't pay to advertise the rating.

With FundSource, if the manager doesn't pay, then no research is done. And if the manager refuses to pay to advertise a FundSource award, the award goes to another manager.

Thank you Jabba. Troubling it is.

To me it sounds like a subtle distinction created by lawyers. The managers are effectively paying for research. While the FundSource approach (fee for research) may seem blunt, it is up front for everyone....

Regarding awards - your last sentence cannot be right.... surely??