The purpose of the Fundata Prospectus Risk Indices is to compare the performance
and volatility of prospectus-issuing funds with similar risk classifications. The
indices are designed to provide institutions, portfolio managers, advisors, and
investors with a powerful tool for comparing fund performance and volatility among
risk peers.
The indices track the performance and risk-return profiles of the constituent mutual
funds in each of the five Prospectus Risk Rating groups:
- Low Risk
- Low to Medium Risk
- Medium Risk
- Medium to High Risk
- High Risk
This unique segmentation of the Canadian retail fund market space allows investors,
advisors, and regulators to determine whether or not a fund is categorized with
the appropriate risk classification and whether or not the level of return is acceptable
for the given risk level.
According to recommendations by the Investment Funds Institute of Canada (IFIC),
standard deviation is the most widely understood measure of portfolio risk, and
should be related to the Prospectus Risk ranking assigned to a fund. However, fund
managers may assign any risk rating they feel is suitable for the fund. This can
cause significant discrepancies among the standard deviation ofmutual funds within
the same risk category. The Fundata Prospectus Risk Indices eliminate these discrepancies
and provide objective Prospectus Risk benchmarks to measure the degree to which
a fund stays within or varies from its stated category risk.
Weighting: Constituent funds within each index are equally weighted.
History: Each constituent mutual fund must have at least 3 years of history.
Categories: Funds are categorized within the prospectuses as:
- Low Risk
- Low to Medium Risk
- Medium Risk
- Medium to High Risk
- High Risk
Exclusions: Money market funds are excluded from the indices on the basis
that there is little variation in the performance or volatility in the group. Institutional
and F-Series funds have also been excluded.
Maintenance: To ensure data integrity, each month constituent tests are run.
The starting value of each mutual fund index is determined and the average of the
monthly returns is applied to create the new index value. Survivorship bias is avoided
by screening for active funds at the end of each month back to inception of the
index.
For more information, download the Fundata Prospectus Risk Indices
Methodology.
To subscribe to index level updates and constituent information, contact us:
Historical performance files to January 2000 are available.