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NBNZ tops new Morningstar ratings

Friday 4th July 2003

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Morningstarís new rating system has seen major changes in fund manager ratings in New Zealand.

The company released its new fund manager ratings on Friday based solely on quantitative measures.

The biggest positive mover is National Bank which has moved from being a three star manager to being the only five star manager.

This move has been greeted with some surprise as National Bank (which is currently on the market) is just a packager of products these days, as opposed to being an asset management firm.

The biggest loser is Westpac that has gone from four stars (five not that long ago) to being the only one star manager.

Manager

New rating

Old rating

National Bank

5

3

Guardian Trust

4

3

ING/ANZ

4

5/3

Sovereign

4

NR

ASB

3

NR

BNZ

3

4

BT

3

4

Fidelity

3

NR

Royal & SunAlliance

3

NR

AMP

2

3

AXA

2

2

Tower

2

4

Westpac

1

4

Morningstar chief executive Scott Cooley says the new ratings are far more transparent, than under the old model that was done 50:50 on quantitative and qualitative measures.

Another of the big changes is that the distribution of ratings has been normalised. That is the one and five star categories each account for 10% of the market, two and four star managers make up 22.5% each of the universe and the remainder are three star managers.

That means unless the pool of managers increases in New Zealand there will never be more than one five star manager and one, one star manager.

Other big changes are that managers who chose not to get rated under the old system, such as Sovereign, ASB Bank, Fidelity and Royal & SunAlliance, are now rated.

However, a number of niche managers like Macquarie, JB Were, Equitable and Fisher Funds lose their ratings as they have insufficient funds across asset classes.

Tower general manager Richard Baker says the new system also penalises organisations that dominate sectors with a small number of funds.

Tower, which goes from four to two stars, is one of those managers. The company has a $200 million plus mortgage group investment fund, but because there arenít many funds in this sector it doesnít get included in the rating process. Also Tower is a strong player in the small hedge fund space.

While some managers donít have company ratings they do have new ratings for each of their funds on offer.

The Bank of New Zealand, which won the fund manager of the year awards from both Morningstar and FundSource last year has been given a three star rating.

ING, which was a five star manager, is now a four star one, while ANZ has gone up one star to four.

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