Fintech

Could new mutual fund evaluation tool put Morningstar and others on notice?

Chase persistence, not performance. That’s one of the catch-phrases used on the homepage of FundReveal, a new…

Chase persistence, not performance.
That’s one of the catch-phrases used on the homepage of FundReveal, a new web-based mutual fund rating tool created by Investment Risk Management Systems Inc. and announced at the end of June. If what it claims to do holds true it sounds like a bargain.
An annual subscription currently costs $250 and advisers can sign up for a free trial.
While I winced at the terms “unique” and “proprietary” appearing in their marketing materials, I took hope upon reading “patent-pending” in there as well.
Call me jaded but I still tend to take more seriously those developers ardent enough to apply for a patent.
The tool was developed for “individual investors, financial advisors and asset managers” by IRMS, whose founder is Ani Chitaley, Sc.D (Doctor of Science, a title not terribly common amongst the denizens of the advisory technology space).
He runs the company with Anthony DuBon and both have spent years at Fidelity Investments among other places within the financial services realm. Chitaley ended up an SVP in the equity division and DuBon a VP in the fixed income mutual fund/enterprise risk management division at Fido.
They are now on their own and have launched this tool.
In the press release it was written: “FundReveal helps investors lower the risk of loss in their portfolios while potentially increasing returns by identifying funds whose managers demonstrate superior investment decision-making capability,” according to Dr. Chitaley (who also happens to be the founder and president of IRMS.
The release states that the tool “uses risk, return and persistence measures to chart the performance of almost 20,000 mutual funds and compare them with the S&P 500…The FundReveal approach differs from other methods by analyzing individual funds in the context of the entire U.S. funds universe, always considering the risk-return that together defines performance. The proprietary Persistence Rating captures the tendency for a fund to regularly deliver higher returns and lower risk than indices such as the S&P 500.”
“People often invest in mutual funds based on recent total returns, but many ‘hot’ funds with high recent returns perform poorly in the future. Investors are better off investing based on persistence than chasing past returns,” Wrote Anthony DuBon, now VP of strategy and operations at IMRS.
The creators also cite their own back testing in the release concluding that “a mutual fund portfolio constructed using FundReveal beat the S&P 500,”achieving “a total gain of 50% over five years from 2005 to 2009, while the S&P 500 lost 5%.”
I’m in the process of setting up a demo and interview with the founders but would like to present them with reader questions as well so please e-mail me ( [email protected] ) or simply comment here.
For more information visit FundReveal online.