FundScope Choice Funds Selection Methodology
Our methodology for selecting FundScope Choice funds is based on the following criteria and assumptions:
Only funds with favourable Manager Value-added (MVA) factors are selected. In other words, each selected fund must have a 5-year Risk-adjusted Return that matches the index return for the period, except for a minor variation not exceeding 025%. In other words, the fund should not lag the index by more than 0.25%. This characteristic demonstrates that, on a risk-adjusted basis, the fund manager was capable of matching or out-performing the index. For a detailed description of how investors can use this indicator to out-perform the index, please refer to our note entitled: "The free lunch that many investors fail to see."
Only funds that out-performed the Index at least 40% of the time are selected. This is to ensure that selected funds have earned such distinction based on a sustainable strategy, not a short-term, unsustainable surge.
Selected funds must not be more volatile than their benchmark index. This criterion serves two purposes: one it excludes highly risky (volatile)funds, which improves the probability of containing losses during periods of market setbacks. Second, it allows investors the flexibility to adjust the level of risk assumed, by increasing the amount invested in the fund, in order to out-perform the index on a risk-adjusted basis. For more details on how this can be achieved, please refer to our writing entitled The Free Lunch that Many Investors Fail to See."