What are PlexCrown ratings and how are they calculated?
PlexCrown ratings use four different measures to calculate the investment performance of a unit trust fund on a risk-adjusted return basis.
The ratings measure the fund’s volatility compared with the benchmark, the risk of underperforming the benchmark and the manager’s skill in adding value above that achieved by the market. Funds in each sub-category are then ranked on those four measures over five-and three-year periods.
The ratios are time-weighted by applying weights of 60 percent and 40 percent if five-and three-year periods are used, or 100 percent of the measures for three years (in the case of younger funds). From these ratings, a composite rating is calculated, and the fund with the highest score in the relevant sub-category is regarded as the winner.
To decide the leading fund managers, an average PlexCrown rating for each manager is determined from the ratings of all their funds in all the qualifying sectors, with a higher weighting given to the manager’s domestic fund ratings.