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Fund Rating FAQ

What value do Value Research's Fund Ratings offer to investors?

Value Research's Fund Ratings offer investors a quick and easy way to identify funds that have produced strong risk-adjusted performance relative to their peers. Value Research's Fund Ratings are completely objective and unbiased.

How should investors use Fund Ratings?

Fund Ratings tell how a fund has performed on a risk-adjusted basis relative to a relevant category in the past. That is a useful piece of information, but it's not enough for a smart investment decision. Fund Rating is a good starting point for a fund evaluation.

How to use Fund Ratings to construct a portfolio?

An optimal portfolio will not necessarily feature only four and five star funds. An investor needs to consider other factors such as risk tolerance, how the various funds in the portfolio may work together and appropriate diversification across asset classes. It may be that a particular fund, which currently has a two Star Rating, is the best choice for a portion of an investor's portfolio. An investor should contact their investment advisor for further assistance with these types of portfolio decisions.

Are the Value Research's Fund Ratings based solely on returns?

No. The Star Rating is a measure that balances both risk and return.

How often are the ratings calculated?

Once a month.

Does Value Research charge fund companies to rate their funds?

No. Value Research does not charge fund companies to rate their funds or use the ratings.

Does Value Research make its calculation methodology public?

Yes. The methodology can be found on our web site at https://www.valueresearchonline.com/fundrating.asp

Are funds rated independently or as part of a group?

Funds are rated based on their performance relative to other funds in their category.

What is the minimum number of funds required to form a category for rating?

Ten funds, each with a minimum of three years history for equity and hybrid funds. 18 months for bond funds.

What are the categories of funds for which Value Research does not provide a rating?

Thematic, international, closed-ended and other funds that do not fit into one of our categories. These funds are not directly comparable. Also funds which do not regularly disclose their NAV are not rated.

Does Value Research consider management fees when rating funds?

Yes, the Star Ratings are calculated on the returns a fund earns after management fees. There is no other special consideration of fees.

What about loads?

The Value Research Star Ratings do not include the effect of loads. The reason for this is that loads are variable so there is no one "right" answer for what the value should be. Investors should consider load when choosing a fund.

How much history does a fund require to be rated?

Equity and hybrid funds less than 3 years old and bond funds less than 18 months old are not rated.

What time periods do the Fund Ratings take into consideration?

In case of equity funds, a fund's overall rating stems from a weighted average of two time periods - three and five where available. Equity funds less than three years old are not rated. In case of debt funds, a fund's overall rating stems from a weighted average of two time periods - 18 months and 3 years where available. Bond funds less than 18 months old are not rated.

I just looked at the Value Research's Fund Ratings and realized a fund I own only receives two stars. Should I sell this fund?

Not necessarily. The Star Rating is a decent first screen for mutual funds, but it is only an introduction to a fund, not a conclusion. The rating is an evaluation of the past, not a prediction of the future.

Why did a fund lose a star? Or why did a Star Rating change?

This is based purely on mathematical inputs. A fund's Star Rating is based solely on a formula that Value Research recalculates each month - there is no subjectivity. The loss of a star doesn't mean someone at Value Research has downgraded the fund - it simply means the fund's relative performance is currently below the cut-off point for its previous rating.

What should I do if a fund I invest in does lose a star?

The fact that a fund has earned a lower Star Rating is not necessarily a signal that it needs to be sold out of your portfolio. It is an indication that the fund may bear closer monitoring over the near term.