Gatekeepers influencing 96 per cent of industry assets are showing a wide disparity in the quality of their research, a new report suggests.
Bestinvest’s Best of Breed list topped the rankings in three of the four time periods, with assessments made over one, three, five and 10 years.
The report, co-authored by Fundscape and gbi2, conducted an in-depth analysis of 36 gatekeepers or fund selectors from D2C buy lists, adviser buy lists, ratings agencies and off-platform lists.
Such buy lists determine the asset flows into 1,060 funds – roughly 30 per cent of the available fund universe – yet these products account for 96 per cent of industry assets, according to the report.
gbi2 managing director Graham Bentley says: “The importance of research in fund selection is undeniable, but there are significant differences in the quality of the research processes we reviewed.
“There are plenty of funds that deserve to be on the lists, but there were also some that had less performance substance and more reputational and sales momentum. We were also surprised by the number of funds that were clearly strong candidates for inclusion, but were overlooked by some independent researchers.”
Schroders was the most popular group, appearing on preferred lists a total of 203 times, followed by Fidelity, with 184 appearances and Invesco Perpetual with 162 listings.
Using seven weighted factors, the selectors were analysed and ranked on their overall research process, with HL Wealth 150 Plus, Bestinvest Best of Breed and ISA Ltd Growth Portfolio emerging as the top three gatekeepers.
The study supports the value of professional buy lists and active fund management.
While the authors recognise passive funds have a role to play in building portfolios, they say outperformance will often come from active management, therefore encourage the use of both strategies.
Fundscape chief executive Bella Caridade-Ferreira adds: “The Fundscape Factors and the Fundscape Frontier Funds can help advisers provide better outcomes for their clients. But the analysis will also be invaluable for fund groups to better understand what they need to do to improve their chances of being selected.
“Getting an independent assessment of your selection process is also beneficial for gatekeepers, and we have already been approached by other gatekeepers wanting to be included in future studies. This can only continue to enhance the value of this study to managers and advisers.”