Methodology - MPF
CAPABILITY AND INTERMEDIARY AWARDS
INVESTMENT MANAGER OF THE YEAR
These awards recognize the underlying investment managers of the Hong Kong MPF Schemes in various asset classes and strategies. The judging criteria are structured according to BENCHMARK’s 5 pillars which we and the judging panel consider to be key indicators of high quality asset management. The pillars are described below.
Although this program assesses investment strategies rather funds, we ask for factsheets and other information related to the flagship fund. The flagship fund must meet the following criteria:
- Must have minimum 3 years’ track record
- DOES NOT have to be locally authorized/recognized, and could be an offshore fund, SICAV, UCITS/Non-UCITS, Cayman, etc…
- Must have an ISIN or SecID
- Fact sheet (for month end June 2019)
Key Changes to Methodology in 2019
For an overview of how we’ve refined the methodology in 2019, click HERE to view the “New in 2019” section.
BENCHMARK and the buy-side community believe that investment strategies are best evaluated holistically rather than over-emphasizing past returns and risk metrics. In that light, our assessment is based on multiple facets of portfolio and risk management as well as corporate strength. We see these facets as interlocking pieces forming a whole picture. There will be 5 pillars, ranging from Investment Approach to Corporate Strength.
For a full description of the 5 Pillars of evaluation and full methodology, please email Christopher Hay at email@example.com
In consultation with our panel of 60-70 buy-side jurors – consisting of 60-70% private and premier banking gatekeepers/fund selectors as well as asset owners, and 30%-40% independent consultants and researchers – we’ve designed a questionnaire, multiple-choice answers and a scoring system.
There are 2 levels of scores:
- Level I Score: All participants are scored based on the multiple-choice answers they provided. This score is objective in the sense that every response has a corresponding score that is applied uniformly to every participant.
- Level II Score: The top 5 in every peer group, according to Level I scores, proceed to Level II scoring. At this stage, the jurors assigned to a particular peer group will score the top 5. The Level II score is relatively subjective, as it relies on the assessment of the jurors. Each juror has a different way of interpreting the information provided by a fund and every juror has a different set of priorities, often guided by the needs of their family office or investors. Some jurors combine both the information provided through BENCHMARK and the information they collected themselves, usually through previous contact with the asset manager or other means.
- The final score is a weighted combination of Levels I and II.
In summary, all participants receive a Level I score. From the Level I scores, we shortlist the top 5 in every category or peer group, and these top 5 progress to Level II scoring.
For a full description of our scoring and full methodology, please email Christopher Hay at firstname.lastname@example.org
The strategy with the highest final score in its peer group wins the Best-in-Class award. Up to two Outstanding Achiever awards will be given to strategies who are within a 5% margin below the Best-in-Class.
TOP MPF FUNDS
BENCHMARK’s top Mandatory Provident Funds (MPF) are purely based on long-term performance. This award is designed to help scheme members identify the best risk-adjusted returns among MPF schemes’ constituent funds.
While MPF scheme members are investing for the long-term, the flexibility offered by the Employee Choice Arrangement (ECA), launched in November 2012, allows members to take advantage of transferring a lump sum from one scheme provider to another once a year.
BENCHMARK filters the MPF fund universe using the following criteria:
- must be a constituent fund authorized by the Mandatory Provident Funds Scheme Authority (MPFA)
- must have a minimum fund size of US$50 million
- must have a minimum five-year track record
A formula is applied to the funds that pass the filter, with the following weights:
1Y annualized return (HKD): 10%
3Y annualized return (HKD): 20%
5Y monthly IRR (HKD): 30%
10Y monthly IRR (HKD): 40%
We have found that the fund expense ratio (FER) is rather insignificant in our calculation towards determining long-term sustainable winners. Therefore, we omitted the FER from our scoring method.
The fund with the highest score in every category will be awarded the Best-in-Class (BIC) title, and the runner-up fund(s) with returns within 5% below BIC will be awarded the Outstanding Achiever (OSA) title(s).