Methodology

Diamond Ratings give funds and fund families an independent rating of 1 to 5 based on a detailed and well-structured scoring process allowing advisers – and their clients – to see where they sit in the market in terms of:

  • Fund performance
  • Competitiveness in other key areas such as cost, scale, access and manager longevity

As part of the independent Defaqto brand, they provide a completely unbiased assessment, using a detailed, robust and transparent process derived from both quantitative and qualitative features.

Based on our analysis of each fund area, market developments and regulatory influences we select an appropriate range of features which, added to our performance-based fund data, enable a comparison of the funds available across the whole universe. It is important to note that we analyse the whole of any particular market, as completely as is practical.

Overall fund rankings are calculated using a scoring method called Data Numerical Analysis (DNA). Each fund element is scored from 1 to 5, with a score of 5 denoting that the fund has the highest characteristics in the market for that element; a score of 1 indicates it has the lowest.

Totalling the individual DNA scores across the chosen range of features gives an overall DNA score, which we use to rank funds. We also identify and calculate appropriate levels that determine each of the 5, 4, 3, 2 and 1 ratings within each fund area that we rate.

Due to the segmentation in the market mentioned above, we have established appropriate methodologies to assess: individual funds that primarily focus on generating returns, either absolute or in excess of their peer group; funds which aim to provide a stream of income; risk targeted fund families that are specifically designed to offer gradations of risk and return; risk focused fund families; and passive funds.

Our methodology is designed to provide an overall rating for a fund or family based on a wide range of distribution channels: including direct, through platforms and through ISAs etc. For a fund to score highly, it should have a good appeal to investors across all of the different avenues to access the fund and also achieve a required aggregate score across both the quantitative and qualitative features.

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