by Detlef Glow.
On November 23, 2021, Refinitiv Lipper unveiled the results of the Refinitiv Lipper Fund Awards for Saudi Arabia.
Since the period between July 1, 2019, to June 30, 2022, was quite challenging for fund managers around the globe, the Refinitiv Lipper Fund Awards got a lot of attention from the asset management industry, as these awards showcase the ability of a fund to deliver high risk-adjusted returns.
Different methodologies lead to different results
Contrary to what a number of market observers would expect, the Refinitiv Lipper Fund Awards are not based on return numbers alone. The winners of a Refinitiv Lipper Fund Award aren’t determined by looking at the funds with the highest returns over the respective awards periods. In actuality, the Refinitiv Lipper Fund Awards are based on the Lipper Leader rating for Consistent Return. These ratings are calculated using a utility function based on the effective return over multiple non-overlapping periods—within the respective three-, five-, and 10-year horizons. The calculations over multiple periods ensure that all periods in which a fund underperforms the average of its peer group are identified. Then, Refinitiv Lipper uses a utility function based on behavioral finance theory to penalize periods of underperformance against the peer group average.
From an investor point of view, the calculation methodology ensures that the winners of the Refinitiv Lipper Fund Awards are funds that have provided relatively superior consistency and risk-adjusted returns compared to a group of similar funds. Therefore, funds that receive a Refinitiv Lipper Fund Award 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.
A document outlining the full methodology for the Refinitiv Lipper Fund Awards can be found here.
Facts on the Saudi Arabian Fund Market
The Saudi Arabian fund industry dominates the Arabian fund markets, as 92.45% of the assets under management of the Arabian fund industry ($41.5bn) are held by funds domiciled in Saudi Arabia ($38.3 bn). As the largest markets are in general also get hit the hardest when it comes to outflows from mutual funds, it is no surprise that funds domiciled in Saudi Arabia (-$13.7 bn) faced the highest overall outflows of all Arabian fund markets (-$14.0 bn overall) over the course of the first nine months of 2022.
Additionally, it is noteworthy that the assets under management ($41.5 bn) and the fund flows (-$14.2 bn) in the Arabian fund markets are dominated by funds investing in money markets (AUM $31.7 bn; fund flows -$13.5 bn).
As for all Arabian markets, one needs to bear in mind that the overall number of domiciled funds is rather small compared to the European fund markets. This is also true for fund market in Saudi Arabia. In addition, it needs to be said that the number of funds varies between asset types, which puts a limit on the number of eligible classification schemes for the calculation of the Lipper Fund Awards for Saudi Arabia.
To find out more about the trends in Arabian fund markets, please read our latest report on Lipper Alpha Insight.
The best mutual funds in Saudi Arabia
There were 133 mutual funds from seven Lipper Global Classifications eligible for a Refinitiv Lipper Fund Award for Saudi Arabia. Out of the respective fund universe, the fund awards honor those funds which had the highest score in the Lipper Leader rating for Consistent Return over the three-, five-, and 10-year periods. Overall, there were seven funds that won an award for the three-year period. Also, six funds were recognized with a Lipper Fund Award over the five-year period, and four funds won the prestigious trophy for the 10-year period. The complete lists of the winning funds can be found on our awards website.
Equity Saudi Arabia
SNB Capital Saudi Small and Mid-Cap Equities Fund won the Lipper Fund Award for the Equity Saudi Arabia category over the three- and five-year period, while Morgan Stanley Saudi Equity Fund was named the Lipper Fund Award winner over the 10-year period.
The best asset management groups in Saudi Arabia
As opposed to other awards where the group awards are divided into those for large and small asset management groups based on a regional assets-under-management split, the awards for Saudi Arabia do not make a distinction between large and small groups. To be eligible for an asset class group award, the groups will need to have at least three distinct portfolios in one of the asset classes: equity, bond, or mixed assets. To be eligible for an overall group award, the groups will need to have at least three equity, three bond, and three mixed-assets funds. Given the structure of the Saudi Arabian fund market, the only asset types with enough asset managers that fulfilled the requirements described above were equities and mixed-assets.
Alistithmar Capital outperformed its 16 opponents and was named the best asset manager in the equity segment.
HSBC outperformed its three opponents and was named the best asset manager in the mixed-assets segment.
Even as there were only two asset managers rewarded with a Lipper Fund Award in Saudi Arabia, one can see from the increasing numbers of fund management groups in the equity and mixed-assets categories that the Lipper Fund Awards are exceedingly competitive and recognize the fund managers that are setting benchmarks within the industry. The Awards commemorate the expertise of the collective fund management industry and the individual funds’ ability to outperform the market.
The views expressed are the views of the author and not necessarily those of Refinitiv. This material is provided as market commentary and for educational purposes only and does not constitute investment research or advice. Refinitiv cannot be held responsible for any direct or incidental loss resulting from applying any of the information provided in this publication or from any other source mentioned. Please consult with a qualified professional for financial advice.
The Refinitiv Lipper Fund Awards, granted annually, highlight funds and fund companies that have excelled in delivering consistently strong risk-adjusted performance relative to their peers.
The Refinitiv Lipper Fund Awards are based on the Lipper Leader for Consistent Return rating, which is a risk-adjusted performance measure calculated over 36, 60, and 120 months. The fund with the highest Lipper Leader for Consistent Return (Effective Return) value in each eligible classification wins the Refinitiv Lipper Fund Award. For more information, see lipperfundawards.com. Although Refinitiv Lipper makes reasonable efforts to ensure the accuracy and reliability of the data contained herein, the accuracy is not guaranteed by Refinitiv Lipper.
About Refinitiv Lipper Fund Awards:
For more than 30 years and in over 17 countries worldwide, the highly respected Refinitiv Lipper Awards have honored funds and fund management firms that have excelled in providing consistently strong risk-adjusted performance relative to their peers and focus the investment world on top funds. The merit of the winners is based on entirely objective, quantitative criteria. This, coupled with the unmatched depth of fund data, results in a unique level of prestige and ensures the award has lasting value. Renowned fund data and proprietary methodology is the foundation of this prestigious award qualification, recognizing excellence in fund management. Find out more at www.lipperfundawards.com.