Advisers are being offered new tools to help them analyse KiwiSaver funds’ risk.
KnowRisk.biz has been launched by Peter Urbani and offers risk analysis of the retirement savings scheme.
Membership of the website is free but risk tools cost $50 per download.
Urbani said sites such as Sorted provided adequate information for retail clients.
But he said there was a vacuum in the market in terms of risk management information for investment advisers and broker intermediaries.
He said surveys such as those from Morningstar, Aon and FundSource were either paper-based or more expensive.
KnowRisk offers a ranking tool, which sorts funds by more than 100 statistical and statutory fields.
Urbani said advisers could perform sophisticated searches such as: “Show me a list of only those funds whose annualised return is greater than 10%, which are larger than $100 million and whose fees are less than 1.50% ranked by their Sharpe ratios in descending order.”
It also offers a KiwiSaver funds dashboard to provide quick information about funds’ relative return, risk, persistence and costs. Users can vary the weightings of each factor to give funds a percentage score out of 100.
KnowRisk will soon offer KiwiSaver fund reports.
Urbani said discussions of risk should be a key part of advisers’ conversations with clients. “The AFA is in the best position to be aware of what the client’s risk tolerances are, and their ability to bear risk. That is quite subjective and means different things to different people.”
He said most clients were less concerned about market volatility than what it would mean for their own investment balances and outcomes.
The tools are Excel-based but Urbani said it was likely they would convert to an app eventually.
Funds are reviewed over the past five years to June 30 and updated quarterly in arrears. Only those funds who have data for the full 60 month period are compared.
Urbani said the tools would require a level of investment knowledge to use.
He said there was criticism of purely quantitative rankings because they are based on historic data only.
“Whilst this is undoubtedly true, it is also true that no one has any data from the future. Oftentimes a quantitative statistical model will outperform purely subjective qualitative views although the ideal is a blend of the best of both.
“While fund holdings and market conditions will change, the behaviour of portfolio managers, their attitudes to risk, and the processes they use to choose investments and manage risk, change far more slowly and are often reflected in the Shape of the probability distribution of the fund especially when compared with those of their benchmarks and peers.”