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Wednesday, June 16, 2004

New Tool Spotlights Managers for Advisors

Reported by Theresa Sim

The developer of a tool that allows advisors to view performance by specific managers (across funds) believes they are in for a surprise. Jim Lowell, head of The Rankings Service (TRS), the company behind the service, says that the tool may reveal, among other things, star managers that are anything but celebrities.

The Rankings Service got its start a few years ago, but was just added to Pershing 's latest release of NetExchange Pro 3.0, Pershing's broker platform, which was unveiled on June 9.

Although users of the software already have access to a proprietary scanning tool backed by Lipper data and S&P's Fund Advisor tool, "mutual fund research is always top on the list for what customers are looking for," said Marc Butler, a director at Pershing.

Butler added that users want other ways of looking at mutual funds other than the fund's past performance, and that many users place high importance on managers.

TRS collects the information from companies themselves for approximately 11,700 managers, through website searches for inception and departure dates.

Manager performance is calculated by finding end-of-day NAV and correlating that result with benchmarks. Lowell noted that the benchmarks may not correspond with the internal benchmarks that managers measure themselves up against.

"We're using pure math...[using] correlation to determine how the fund actually behaves," said Lowell, instead of what a manager's stated strategy or benchmark may be. The correlation is updated on a daily basis.

Even multi-managed funds, such as the Capital Group's American Funds will be measured using a mix of quantitative and qualitative judgment, said Lowell. For instance, analysts may take into account "lead" managers at multi-managed funds, or evaluate them as a group.

Pershing's updated platform is being launched to the home offices of brokers currently, and outreach to individual brokers will take place in September, said Butler.

75,000 brokers have access to either the older version of the software, ExchangePro 2.0, or the new release, both of which contain The Rankings Service.

What will the managers' response to this capability be? Lowell believes that the outperforming ones, at least, "will probably breathe a sigh of relief that someone will pay attention to their efforts." 

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