Lipper Leaders Rating System

Different people have different perception of success.  What is important to you or how you define success differs from your neigbour.  Similarly your investment goals differs from your neigbours.

This key idea is the foundation for the  Leader Rating Systems developed by Lipper’s Global Research team to help guide investors and their advisors in selecting funds that suit individual investment styles and goals. 

The 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. The 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. Two main metrics are Consistent Return and Capital Preservation and Total Return.

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.

Refer articles below to learn more about each metric.

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.

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.

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.

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.

Total Returns

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.

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.).