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FundsIndia.com, India’s first online investment portal for mutual funds and equities, has just launched its ratings services. The portal already provides a curated list of funds for investors called select funds. So, what’s the need for a ratings service now?
Srikanth Meenakshi, Co-founder and COO of FundsIndia.com, said the idea was to give MF investors a comprehensive set of MF services on a single platform and to allow them to evaluate how their MF holdings rate as compared to the plethora of funds available.
He said, “We also did not want to have any ambivalence between our advisory calls and what we call ratings. That potential for difference was always there when we relied on outside ratings.” He said that while ratings is not the last piece in the puzzle, it would help in filling out the suite of offerings.
The ratings system provides a rating on a scale of one to five, with five being the top category. Among the primary metrics used are consistency which includes one-year return rolled daily for three years and three-year return rolled daily for five years against the category average and benchmark as well as risk and volatility measures, such as Sharpe ratio, sortino ratio and standard deviation of returns.
Srikanth said that the parameters emphasise the long-term performance and consistency of a fund and aim to avoid having ratings influenced by short-term movements. Asked about the challenges in maintaining the independence required as a rating service when it is also a distribution platform, Srikanth said their track record would speak for itself. Pressures were not new.
Even now, asset management companies do question their non-inclusion in the select list of funds put out by the distribution platform. But when they explain their methodology, these fund houses accept their argument and leave it at that, he said.
“Our select funds list has not been influenced by commissions; our advisory services have not been influenced by commissions, so ratings also won’t be influenced by commissions.”
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