Crowd based fund and advisor ranking

Crowd based fund and advisor ranking

We have recently completed programming our ranking engine. It will constantly run and update the ranking for Funds and Advisors.

I would like to give a short explanation on how the ranking works:

Funds

The fund rating is published on a monthly basis.

A fund rating outlook (Positive, Stable or Negative) will be updated every time an Advisor rates the fund or updates their previous fund rating.

The fund rating is simply an equal average of the rankings provided by Advisors.

In the future we will give an extra weighting to ratings provided by Advisors with a high Alpha Ranking.

Advisors

The raters ranking of each individual fund is compared to the actual performance of the fund against its benchmark.

The closer the rating is to the actual performance, the higher the advisors ranking.

There are 5 different rating options (expressed by 5 to 1 stars):

5 stars - Top 20%
4 stars - Next 20%
3 stars - Next 20%
2 stars - Next 20%
1 star - Lowest 20%

A 'hit score' is given to the effectiveness of the advisors prediction for each fund. SharingAlpha rates the Advisors using the average 'hit ratio' the Advisors achieved from ranking different funds.

Comparing the 'hit ratios' of all the Advisors allows SharingAlpha to rate the Advisors in terms of their talent in predicting fund performance.

Advisors can end up in one of 3 groups:

  1. Triple Alpha - Advisors with top decile 'hit ratios'.

  2. Double Alpha - Advisors with top quartile 'hit ratios'.

  3. Single Alpha - Advisors with above average 'hit ratios'.

We strongly believe that the above ranking methodology expresses the collective view of the crowd in terms of the funds future chance of beating its benchmark.

It also offers the raters a strong incentive to rate funds and build their own track record.