Thomson Reuters Lipper Leaders

Read More on Thomson Reuters Lipper Content and Solutions

 

A sophisticated approach to finding funds that fit your needs 

 

Thomson Reuters Lipper’s Global Research team developed the Leader Rating System to help guide investors and their advisors in selecting funds that suit individual investment styles and goals.

The Lipper Leader Rating System is a toolkit that uses investor-centered criteria to deliver a simple, clear description of a fund’s success in meeting certain goals, such as preserving capital, lowering expenses or building wealth. Lipper Ratings provide an instant measure of a fund’s success against a specific set of key metrics. These metrics can be used alone or in combination to build individualized portfolios that suit an investor’s particular goals.

Being recognized as a Lipper Leader is an important accomplishment. The Lipper Leader designation is respected as an expert third-party evaluation. Furthermore, it is investor-centric, and therefore easy for advisors and investors to use in making fund selections.

The Lipper Leaders designation can help a fund company highlight the strengths of funds that may not be easy to market using traditional measures. It also can showcase funds in all categories, not just recent favorites, and segment your range of products to appeal to a wide variety of investors.

The Lipper Leader icons are provided on this web page for download.

More about Lipper Leaders Methodology

 

The rating system

An overview

Lipper Leader ratings are derived from highly sophisticated formulas that analyze funds against clearly defined criteria. Funds are compared to similar funds, and only those that truly stand out are awarded Lipper Leader status.

Funds are ranked against their peers on each of four measures: Total Return ,Consistent Return, Preservation , and Expense . A fifth measure, Tax Efficiency , applies in the United States. Scores are subject to change every month and are calculated for the following periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for each measure over 3-year, 5-year, and 10-year periods (if applicable).

For each measure, the highest 20% of funds in each peer group are named Lipper Leaders. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated 2, and the lowest 20% are rated 1.

While Lipper Leader ratings are not predictive of future performance, they do provide context and perspective for making knowledgeable fund investment decisions.

Total Return

A Lipper Leader for Total Return is a fund that has provided superior total returns when compared to a group of similar funds.

Lipper Leaders for Total Return may be the best fit for investors who want the best historical return, without looking at risk. This measure alone may not be suitable for investors who want to avoid downside risk. For more risk-averse investors, Total Return ratings can be used with Preservation and/or Consistent Return ratings to make an appropriate selection that balances the risk and return.

How we rate Lipper Leaders for Total Return

Lipper Leader ratings for Total Return reflect funds’ historical total return performance relative to peers. Ratings for Total Return are computed for all Lipper classifications with five or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).

The ratings are subject to change every month and are calculated for the following time periods: 3- year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for the Total Return metrics over 3-year, 5-year, and 10-year periods (if applicable). The highest 20% of funds in each classification are named Lipper Leaders for Total Return. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated 2, and the lowest 20% are rated 1.

Consistent Return

A Lipper Leader for Consistent Return is a fund that has provided superior consistency and risk-adjusted returns when compared to a group of similar funds. Lipper Leaders for Consistent Return may be the best fit for investors who value a fund’s year-to-year consistency relative to other funds in a particular peer group.

Investors are cautioned that some peer groups are inherently more volatile than others, and even Lipper Leaders for Consistent Return in the most volatile groups may not be well suited to shorter-term goals or less risk-tolerant investors.

How we rate Lipper Leaders for Consistent Return

Lipper Leader ratings for Consistent Return reflect funds’ historic returns, adjusted for volatility, relative to peers. Ratings for Consistent Return are computed for all Lipper classifications with five or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).

The ratings are subject to change every month and are calculated for the following time periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for the Consistent Return metrics over 3-year, 5-year, and 10-year periods (if applicable). The highest 20% of funds in each classification are named Lipper Leaders for Consistent Return. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated 2, and the lowest 20% are rated 1.

Preservation

A Lipper Leader for Preservation is a fund that has demonstrated a superior ability to preserve capital in a variety of markets when compared with other funds in its asset class, which may be equity, mixed equity, or fixed-income funds.

Choosing a Lipper Leader for Preservation may help to minimize downside risk relative to other fund choices in the same asset class. Investors are cautioned that equity funds have historically been more volatile than mixed-equity or fixed-income funds, and that even Lipper Leaders for Preservation in more volatile asset classes may not be well suited to shorter-term goals or less risk-tolerant investors.

How we score Lipper Leaders for Preservation

Lipper Leader ratings for Preservation reflect funds’ historical loss avoidance relative to other funds within the same asset class. Scores for Preservation are computed from three broad asset classes — equity funds, mixed-equity funds, and fixed-income (bond) funds.

The ratings are subject to change every month and are calculated for the following time periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for the Preservation metrics over 3-year-, 5-year, and 10-year periods (if applicable). The highest 20% of funds in each classification are named Lipper Leaders for Preservation. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated 2, and the lowest 20% are rated 1.

Expense

A Lipper Leader for Expense is a fund that has successfully managed to keep its expenses low relative to its peers and within its load structure.

Lipper Leaders for Expense may be the best fit for investors who want to minimize their total costs. It can be used in conjunction with Total Return or Consistent Return to identify funds with above-average performance and lower-than-average cost.

How we score Lipper Leaders for Expense

Lipper Leader ratings for Expense reflect funds’ expense minimization relative to peers with similar load structures. Ratings for Expense are computed for all Lipper classifications with five or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).

The ratings are subject to change every month and are calculated for the following time periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for the Expense metrics over 3-year-, 5-year, and 10-year periods (if applicable). The highest 20% of funds in each classification are named Lipper Leaders for Expense. The next 20% receive a rating of 4; the middle 20% are rated 3; the next 20% are rated 2, and the lowest 20% are rated 1.

Tax Efficiency (US only)

A Lipper Leader for Tax Efficiency is a fund that has been successful at postponing taxes over the measurement period relative to similar funds.

Lipper Leaders for Tax Efficiency may be the best fit for tax-conscious investors who hold investments that are not in a defined-benefit or retirement plan account. Investors in high federal tax brackets are more likely than those in lower tax brackets to see more benefit from tax-efficient funds.

Tax Efficiency on its own does not take relative or absolute performance into account. Investors can pair Tax Efficiency with Consistent Return and/or Total Return to find funds that have delivered solid relative performance and have been better than their peers in postponing taxable distributions.

How we score Lipper Leaders for Tax Efficiency

Lipper Leader ratings for Tax Efficiency reflect funds’ historical success in postponing taxable distributions relative to peers. Scores for Tax Efficiency are computed for all Lipper classifications with five or more distinct portfolios and span both equity and fixed-income funds (e.g., large-cap core, general U.S. Treasury, etc.).

The ratings are subject to change every month and are calculated for the following time periods: 3-year, 5-year, 10-year, and overall. The overall calculation is based on an equal-weighted average of percentile ranks for the Tax Efficiency metrics over three-, five-, and ten-year periods (if applicable). The highest 20% of funds in each classification are named Lipper Leaders for Tax Efficiency, the next 20% receive a rating of 4, the middle 20% are rated 3, the next 20% are rated 2, and the lowest 20% are rated 1.

Lipper Leaders are updated monthly. Lipper Leaders and the Lipper Leader Fund Count file are updated by the evening of the 7th business day of each month.

 

 

Full Disclosure

Some peer groups are inherently more volatile than others – a Lipper Leader for Consistent Return in a volatile group may not be well-suited to shorter-term goals or less risk-tolerant investors.

Lipper Leader fund ratings for Total Return reflect fund historic total return performance relative to peers. Lipper Ratings for Consistent Return reflect fund historical risk-adjusted returns relative to peers. Lipper Ratings for Preservation are relative, rather than absolute. Lipper Ratings for Expense reflect fund expense minimization relative to peers. Lipper Ratings for Tax Efficiency (U.S. Only) reflect fund historical ability to postpone taxable distributions. Lipper Ratings DO NOT take into account the effects of sales charges. Overall Ratings are based on an equal-weighted average of percentile ranks for each measure over 3-, 5-, and 10-year periods (if applicable).

Lipper Leader fund ratings do not constitute and are not intended to constitute investment advice or an offer to sell or the solicitation of an offer to buy any security of any entity in any jurisdiction. As a result, you should not make an investment decision on the basis of this information. Rather, you should use Lipper Ratings for informational purposes only. Certain information provided by Lipper may relate to securities that may not be offered sold or delivered within the United States (or any State thereof) or to, or for the account or benefit of, United States persons.

Lipper is not responsible for the accuracy, reliability or completeness of the information that you obtain from Lipper. In addition, Lipper will not be liable for any loss or damage resulting from information obtained from Lipper or any of its affiliates.