Ratings Definitions

Rating Definitions

Highly Recommended

Zenith believes that the Fund (or Product) has a very high probability of meeting its stated investment objectives. In a relative context, the Fund (or Product) scores highly across each of Zenith’s key areas of assessment.

Recommended

Zenith believes that the Fund (or Product) has a high probability of meeting its stated investment objectives. In a relative context, the Fund (or Product) scores highly across most of Zenith’s key areas of assessment.

Approved

Zenith believes that the Fund (or Product) should produce outcomes consistent with its stated investment objectives, albeit we have identified areas for potential improvement across Zenith’s key areas of assessment.

Under Review

The Fund (or Product) rating has been temporarily suspended pending clarification of material matters by the Zenith Research team. Zenith advises no new investment in the Fund (or Product) while it is rated Under Review.

Redeem

Zenith has downgraded the Fund (or Product) to Redeem. This has occurred due to lowered conviction, or a significant event adversely impacting the Fund (or Product). As such, Zenith advises investors to redeem their investment.

Not Rated - Declined

No previous rating assigned. The Fund (or Product) has passed Zenith’s preliminary screen however the issuer has declined to participate in a full due diligence review.

Not Rated - Withdrawn

Zenith’s rating has been withdrawn following the decision of the issuer to cease coverage or following termination of the Fund (or Product).

Not Rated – Screened Out

The Fund (or Product) has either failed to meet Zenith’s quantitative and/or qualitative due diligence process; is yet to be included in Zenith’s sector review process given the recent inception date; or has been screened out due to a conflict of interest situation that Zenith has chosen to avoid.

Zenith ratings should generally be interpreted as a measure of Zenith’s conviction in a products quality and management’s ability to deliver their stated objective as well as a measure against sector group peers. Specifically, each rating is relative to its own peer group (sector). However, it must be appreciated that Zenith’s ratings do not address asset class selection or portfolio construction and as such ratings should not be used in isolation.

It must also be appreciated that Zenith’s ratings cannot be accurately compared with that of other Research providers owing to differences in research methodologies and approach to coverage. Any comparisons between ratings from different research providers are at the user's own risk.

Absolute Risk Ratings

The Absolute risk rankings should be viewed as a guide to potential capital volatility (in both gains and losses) of the relevant investment strategy (Zenith Asset Class / Sub Asset Class classification) of this product. A number of factors have been considered in setting this risk level. For liquid asset classes, we have typically used the underlying historical return volatility of the product’s benchmark if the benchmark is a reasonable proxy for returns for this strategy. Where the risk of an investment cannot be reasonably estimated by historical benchmark return analysis, we have made a qualitative assessment of absolute risk and considered factors such as illiquidity risk, transparency, strategy risk, operational risk etc.

VERY HIGH

Funds classified as Very High risk are exposed to sectors with very high historical absolute volatility (16+% p.a. plus standard deviation over 20 years to June 30, 2011). Where the risk of an investment cannot be reasonably estimated by historical return analysis, we have considered a range of qualitative risks in assigning a Very High absolute risk level.

HIGH

Funds classified as High risk are exposed to sectors with high historical absolute volatility (8-16% p.a. standard deviation over 20 years to June 30, 2011). Where the risk of an investment cannot be reasonably estimated by historical return analysis, we have considered a range of qualitative risks in assigning a High absolute risk level.

MODERATE

Funds classified as Moderate risk are exposed to sectors with moderate historical absolute volatility (4-8% p.a. standard deviation over 20 years to June 30, 2011). Where the risk of an investment cannot be reasonably estimated by historical return analysis, we have considered a range of qualitative risks in assigning a Moderate absolute risk level.

LOW

Funds classified as Low risk are exposed to sectors with low historical absolute volatility (2-4% p.a. standard deviation over 20 years to June 30, 2011). Where the risk of an investment cannot be reasonably estimated by historical return analysis, we have considered a range of qualitative risks in assigning a Low absolute risk level.

VERY LOW

Funds classified as Very Low risk are exposed to sectors with very low historical absolute volatility (< 2% p.a. standard deviation over 20 years to June 30, 2011). Where the risk of an investment cannot be reasonably estimated by historical return analysis, we have considered a range of qualitative risks in assigning a Very Low absolute risk level.

Relative Risk Rating

The relative risk rankings should be viewed as a guide to the relative risk of a product within its sector. The relative risk levels are listed from highest to lowest and are intended to provide some insight into the potential divergence of the investment’s return profile relative to its assigned benchmark.

Zenith Rating Distribution

The distribution of Zenith’s ratings as shown below is current as at 01/09/2020.

Not Rated - Screened OutNot Rated - DeclinedNot Rated - WithdrawnUnder ReviewApprovedRecommendedHighly Recommended
Alternatives4834512325
Australian Fixed Interest41101215406
Australian Shares1597256113626
Cash15314
International Fixed Interest3015212426
International Shares18027754215531
Mortgages5
Multi-Asset1992511323891
Property435328166
Real Assets4715473
Retirement Products147

Currency of Ratings

Each Zenith Product Assessment and rating is marked with the date it is issued. Product ratings remain valid until they are updated, replaced or withdrawn. Ratings will generally be updated annually according to the relevant sector review cycle. Detailed information on ratings changes and any instances where managers have withdrawn from the ratings process can be found either on the individual fund pages or within the relevant Sector Reviews, both available on the Zenith website.

Withdrawals of ratings by Zenith may only occur under the following circumstances, where either;

  1. The Fund rating is downgraded to below Investment Grade;
  2. the Manager elects to cease ongoing coverage;
  3. the Manager closes the Fund to applications; or
  4. the Fund is terminated and wound up.

Managers electing to cease coverage of a product can only do so where a new Research Agreement for ongoing coverage has been issued by Zenith and subsequently declined by the Manager. Once a Research Agreement is entered into, it is binding and irreversible and will result in a Zenith rating being issued regardless of the outcome.

Given the dynamic nature of the industry, changes relating to fund managers business operations, personnel or processes may occur at any time. Accordingly, Zenith’s ratings are subject to change without notice and can occur at any time outside the scheduled annual review cycle. Clients must ensure that they check the currency of a Product Assessment and rating on Zenith’s website to ensure it remains valid.

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info@zenithpartners.com.au

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