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Masters of the money-go-round

Allan Nam

In choosing the winners of the awards, S&P dismisses the occasional big return in favour of recognising long-term performance

It is long-term performance in the world of finance that interests Standard & Poor's when choosing the winners of the South China Morning Post Fund Manager of the Year Awards 2003.

Funds were assessed according to their risk-adjusted performance over three, five and 10 years, the 12-month assessment having been scrapped a year ago in line with the growing maturity of Hong Kong's investment fund industry.

According to S&P's Fund Services managing director William Reidy, the odd big score on the equities market will not make a winner out of a fund either.

The relative risk-adjusted ratio calculations employed to pick out champion funds scrutinise weekly and monthly, rather than year-end, figures.

This approach, he explains, identifies true consistency and eliminates funds that may have relied on sporadic triumphs to do well.

'The methodology we deploy for our award programme was developed well over a decade ago and is globally consistent. For the different markets we are in, there will naturally be adaptations made to cater for local market conditions but the guiding principle behind the awards is consistent worldwide, and that is we wish to recognise funds that are consistent above-average performers from both a risk and return perspective,' he says.

It should come as no surprise then that the usual suspects keep popping up on the winners' roster year after year.

Jardine Fleming Asset Management walked away with two Best Performing Fund Management Group awards for their five- and 10-year performances this time around, as well as sector awards in Equity Asia Pacific excluding Japan and Equity Japan. JF missed out on the main honours in 2002 but were winners in the previous two years.

Threadneedle Asset Management claimed the three-year group performance gong and a sackful of sector awards in, among others, the Equity UK, Equity Latin America and Fixed Income Sterling categories. The British-based fund management company secured the five-year group award last year and has regularly excelled among Latin American equity and fixed income sterling funds.

Citigroup, group award winner in 2000, also deserves a mention. Its balanced funds claimed top spots in the Asset Allocation Global Dynamic and Global Neutral categories.

No doubt, equity funds were the star performers last year. S&P research shows that equity funds that registered for sales in Hong Kong notched up an average return of 41 per cent, although achieving only a 6 per cent average return over three years.

'In general, 2003 was an excellent year for global equities with major markets ending the year sharply higher,' Mr Reidy says.

'The markets started on weak footing but recovered strongly thereafter as geopolitical concerns subsided and the global economic outlook improved. Technology issues rallied as a pick-up in orders in semi-conductor companies led to a more positive outlook for the sector.'

Turning to bonds, S&P research shows that returns on fixed income funds slid, averaging 18 per cent last year, compared with 37 per cent over three years. However, due to the low interest rate environment over the past year, riskier fixed income instruments fared well as investors sought better yields, according to Mr Reidy.

S&P estimates such higher yielding fixed-income funds returned as much as 43 per cent during the year.

Asset allocation funds, which hold a mix of equity and bonds in an effort to diversify risk, returned an average 26 per cent last year.

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