Fund Management

Helping Professional Fund Investors Build A Proven Track Record

Tom Burroughes, Group Editor, London, 24 June 2021

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Are you seeing tangible differences being made in how fund allocators act once someone has used the system to evaluate them? Do you think fund allocators benefit? Is there any pushback?
We see a ×4 growth in traction amongst fund allocators once they achieve a high ranking. Many of them share their achievement on LinkedIn, Twitter, their email signature, etc. which helps us to grow awareness of our unique platform.

The fact that our members determine which funds will be rated, and obviously how they will be rated, solves many issues surrounding potential conflict of interest that are present in the traditional rating industry. It also offers professional fund buyers a way to improve their career prospects and to complement their fund research activities by leveraging on insights gathered from a large group of specialists. 

What effect has the SharingAlpha approach had on funds that are highly ranked? Are you seeing more investment flows to funds that were unjustly ignored in the past? Without necessarily naming names, are there stories of funds that have really benefited from this process? 
SharingAlpha gathers rating from professional fund buyers and presents the average rating the different funds receive. The raters are asked to rate the funds based on their expectations in terms of the fund's chances of outperforming in the future. SharingAlpha only takes into account ratings from users that they can identify as professional fund buyers. A fund rating of above 3 implies that raters expect the fund to create alpha in the future. Funds with an average rating of above 4, based on at least 10 professional raters, are entitled to present the “Highly Rated Fund” SharingAlpha rating logo.

The fact that a number of large fund providers (for example, M&G) have begun exhibiting the SharingAlpha rating logos on their marketing materials is a strong sign that the market is open to change. Since our rating methodology is based on the future expectation of professionals rather than past performance, then amongst our highly rated funds you can find newer and smaller funds as well which makes it super special and vital for fund managers that are looking to grow their AuM. As a matter of fact, the vast majority of funds out there are managing less than $100 million and that's not because they necessarily have a smaller chance of generating alpha in the future but rather, since the industry still uses traditional methodology based on past performance, that has not proven to work. We offer an alternative.

What asset classes fall under your orbit? All asset classes including more alternative funds? Are there parts of the world’s funds market that you don’t or cannot cover for any reason? 
No.

A big issue remains one of fees, transparency and clear performance attribution. In a world where a decade of rising equities made it quite easy for beta-trackers, how big a challenge remains for wealth managers to know whether they get what they pay for? 
That is a difficult challenge since there are thousands of funds to choose from. Without a platform that offers the possibility to share insights, it is impossible to cover all the relevant options and to conduct proper due diligence on an ongoing basis.

Would you say that conflicts of interest in how funds are chosen for clients have reduced, or have they mutated into different forms? Are there issues that make you particularly concerned where SharingAlpha might make a difference? 
The shift from the kick-back model to a more open architecture model is obviously positive. However, most allocators still use historical performance to pick funds which results in mediocre results for investors. SharingAlpha offers a tool that can allow allocators to justify their decisions using a different rating methodology.

What can we expect to see down the line from Sharing Alpha in terms of services, etc?
We still have many ideas we would like to roll out. For example, leveraging on our growing community and technology to assist funds to raise the initial seed money from a group of professional investors rather than the current situation where they're normally dependent on one single large investor.

Who are your main clients? What sort of firms and organisations in the wealth management space use you (family offices, discretionary wealth managers, private banks, other)?
The common denominator of all our members is that they all analyse funds or managers on behalf of others. They can be analysts working for sovereign funds, pension funds, endowment funds, consultants, other rating agencies, family offices, fund selection team members, wealth managers or financial advisors.

It has taken you a few years to reach the point of having a successful, profitable business. Getting this far has been a big effort. What kept you going and what drives you and your colleagues?
We really enjoyed the journey. I don't think I could have kept the energy to go through this long rollercoaster ride without the right co-founder, support from my wife and the dream of creating something new that people will appreciate. 

If you were not involved in this business, what else would you be doing? 
I'm attracted to building new ventures so I guess I would have been involved in some different idea and helped it go from 0 to 1. I'm less passionate, and therefore, less experienced in taking companies from 1 to 100. After working for large corporates at the early stages of my career and now experiencing working on my own idea, I'm quite sure that this current work environment fits me best.

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