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2018-06-21

2018-06-20

2018-06-19




Market Indices

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DJIA 24,657.80 42.41 16:39
NASDAQ 7,781.52 55.93 17:15
Nikkei 225 22,700.50 145.07 14:59
HSI 29,346.00 350.17 14:15
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SHCOMP 2,894.96 20.77 14:15
Shanghai B 287.72 2.17 14:15
ASX/S&P 6,332.90 58.30 17:15
FTSE 7,627.40 23.55 16:34
DAX 12,695.16 17.19 18:30
10-Year Gov't Bond Yields (%) 6/20
Country Last Change
US 2.944 0.006
UK 1.297 0.014
Germany 0.377 0.004
France 0.711 0.008
Japan 0.043 0.004
China 3.617 0.031
Bid Change HK
Gold Futures 1,266.60 7.90 13:55
Oil(Brent) Futures 74.29 0.45 13:56
EUR/USD 1.1544 0.0029 14:19
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AUD/USD 0.7345 0.0022 14:18
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Getting Started

Due Diligence

Introduction
Objectives
General Guidelines
Procedures

    1. Conduct due diligence before making the fund available to clients
    2. Company level due diligence
    3. Product (Fund) level due diligence
    4. Fund Classifications & Categories
    5. Product Risk Rating
    6. Investment Fund Risk Rating Methodology


iSignal

Function
Methodology
Example

 



Due Diligence

Introduction

Fund due diligence conducted by Noble Apex Asset Management Research Team (AMRT) involves a thorough understanding of product structures, operation procedures, nature of the underlying investments, risk tolerant levels, experience and reputation of issuers and service providers, cost structures, historical performance, liquidity, lock-up period, redemption provisions, valuation, pricing and safekeeping arrangements and other relevant risk factors, etc.

Apart from reading prospectus, offering circulars and promotional materials etc, AMRT will check and verify fund information by making enquiries to product providers and third-party information providers, in order to confirm that the product information are correctly presented and product features are not deceptive .

iFund customers make their own investment decisions; the contents of iFund website are provided for informational purposes only. AMRT ascribes a risk rating to each fund for iFund customers’ reference only. iFund customers must understand that there are many factors to consider before making investment decisions. In addition to the product features, iFund customers should also understand their ability to take risks. Furthermore, iFund customers should consider the market and industry risks, economic and political risks, regulatory restrictions, and any other factors that may directly or indirectly affect the fund’s growth prospect and risk returns profile.

AMRT monitors the natures, characteristics and risks of each fund by conducting due diligence at regular time intervals (once per year or when necessary) with timely updates.

Objectives:

  1. Thoroughly verify and understand the main features, structure, nature, return and risk profile of each fund, as well as the background of its service providers
  2. Ensure the investment process of each fund reveals sufficient product transparency and continuity
  3. Ensure each fund has an established monitoring and review mechanism for its investment process which is also compliance with the relevant regulations.

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General Guidelines

Rationale and methodology of due diligence are engineered by AMRT and follow a set of qualitative and quantitative guidelines that in our view are easily explainable, understandable and adhere to best practice advised by regulatory bodies.

The due diligence procedure is reviewed annually or amended when deemed appropriate by the investment committee.

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Procedures

1. Conduct due diligence before making the fund available to clients

a. Due diligence on investment candidates shall be taken on both the company and individual fund levels. Most of the street’s assessment practice is weighted toward fund-specific issues. AMRT considers corporate level’s business philosophy and management equally important, as these factors can affect the product performance materially.

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2. Company level due diligence

a. Before investigating an individual fund, throughout due diligence must be first conducted on the company that issues the products. AMRT should contact relevant institutions to obtain and evaluate the following information:

b. In general, strength of the asset management company will be demonstrated by the clarity of their philosophy and investment guidelines, the years of experience, the size of financial institution, and range of product coverage, etc. Investment committee will review all the qualitative and quantitative measure and hold the discretionary power to approve or reject the product providers.

c. AMRT should make use of the standard “Due Diligence Questionnaire (Company Level)” to obtain the necessary information. Data and information obtained should be verified with third party independent analysis institutions, such as Bloomberg, Morningstar and Lipper for integrated risk assessment.

d. For an asset management company to be qualified as an approved product provider, the completed “Due Diligence Questionnaire (Company Level)” must be reviewed and approved by investment committee and an RO from the Board of Directors, and endorsed by the compliance Officer.

e. Each qualified asset management company’s Due Diligence Questionnaire must be reviewed annually for relevancy or upon materials changes of the providers.

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3. Product (Fund) level due diligence

a. Once an asset management company is qualified on our provider list, AMRT should begin the evaluation process with determining the product’s asset classes.

b. The following diagram represents the highest levels of our classification system, which aims to create sufficient categories in the classification system to differentiate investment funds properly, while ensuring that there is enough equivalence among funds in the same peer group.

c. Once AMRT have classified the fund into proper asset class, they should examine a wide range of qualitative and quantitative factors, as shown on the table below. Research findings have shown that these factors are critical in determining the superiority, consistency and persistency of a fund’s long term performance.

c. Once AMRT have classified the fund into proper asset class, they should examine a wide range of qualitative and quantitative factors, as shown on the table below. Research findings have shown that these factors are critical in determining the superiority, consistency and persistency of a fund’s long term performance.

e. Members of the AMRT must complete the online “Due Diligence Questionnaire” for the investment committee‘s approval. Once the required information is obtained, the investment committee will discuss whether the fund is suitable to iFund clients.

f. AMRT should also make use of third party resources, such as Morningstar, Bloomberg, Lipper or any available sources, to independently verify accuracy and integrity of the product’s information.

g. Investment committee should monitor the due diligence process on an ongoing basis to ensure it is completed on a timely basis and accurately.

h. A critical task of investment committee is to maintain an appropriate and continuous oversight over all rated funds. The due diligence exercise for each fund should be conduct on an annually basis or when appropriate, e.g. when material fund or personnel changes occur.

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4. Fund Classifications & Categories

a. Fund category classifications were design to help investors make meaningful comparisons between mutual funds. The investment objective listed in a fund’s prospectus often did not adequately explain how the fund actually invested. iFund’s classifications solved this problem by breaking funds into peer groups based on their asset classes invested and geographical focuses. Criteria that are commonly used to classify the category of funds include, but not limited to, types of securities, market capitalization, sector, geographic coverage, and sometimes objectives. iFund regularly reviews the category structure and funds within each category to ensure that the classification system provides the best possible description of each mutual fund.

b. Funds available on iFund are classified into 23 categories and 37 geographical focuses:

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5. Product Risk Rating

a. At the conclusion of the due diligence, each fund is classified according to the preset asset classification and risk rating scoring procedures.

b. By taking consideration of each fund’s specific characteristics, AMRT should make use of the risk rating checklist to calculate its risk rating, ranking from 1 to 6 (1 is the lowest risk, 6 is the most risky).

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6. Investment Fund Risk Rating Methodology

a. iFund risk rating methodology is a qualitative and quantitative assessment of a single fund’s geographic and asset class focus, investment style and any potential risk factors, as measured from one (1) to six (6). Discretionary marginal adjustment could be made on case-by-case investment assessments by investment committee.

b. AMRT aims to provide independent and additional guidance to investors on a fund’s risk characteristics. Importantly, our ratings do not incorporate a judgment about the future expected performance of that sector or peer group as a whole.


The basic principles are:

  1. The more diversified the scope of investment (i.e., markets, sectors, strategies, style) => reduced concentration risk => The lower the risk rating
  2. Developed economies/markets are less risky than developing markets (applicable to both equities and bonds)
  3. Large-caps are less risky than mid-to-small caps
  4. Value investments are less risky than growth investments
  5. Shorter-term instruments are less risky than longer-term instruments (applicable to bonds, or fixed income funds)
  6. Capital guaranteed funds are less risky than non-guaranteed funds (subject to the credit worthiness of guarantor)
  7. Highly liquid funds (in terms of dealing frequency and underlying holdings) are less risky than less liquid funds
  8. For equity funds, well diversified global funds that invest mainly in large (or larger) cap stocks using value approach are scored a risk rating of 3. Other equity funds are then compared to this baseline and assign relatively lower or higher risk ratings.
  9. For bond funds, G7 currency money market funds without a negative year are scored a risk rating of 1. Other fixed income funds are then compared to this baseline and assign the same or higher risk ratings.
  10. For hedge funds, low leveraged multi-strategy market neutral funds managed by credential managers and invest globally are scored a risk rating of 3. Other hedge funds are then compared to this baseline and assign the same or higher risk ratings.
  11. Derivative products are scored a minimum risk rating of 4, depending on the amount of leverage and level of counterparty risks.

Review and House Keeping Guidelines:

  1. Risk rating check list must be completed for setting up new fund risk rating, which must be approved and checked by designated head of AMRT.
  2. Independent fund research reports and extracts (such as Morningstar, Bloomberg, Lipper) for the purpose of validating fund data must be recorded properly.
  3. Investment committee and AMRT will review annually (fourth quarter each year), the appropriateness of the rating methodology and to ensure the fund risk rating is consistent with the fund’s most updated objectives and risk/return characteristic. The result of the annual review must be documented.

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Version 1.2 (2013.12.01)

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iSignal

Function

iSignal is a visual aid that reflects funds’ relative performance. It is designed to help you quickly identify relative fund performance over the past one year in the group of funds you select.

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Methodology

When you have selected fund parameters such as Fund House, Geographical Focus, Asset Class or Sector, iFund then lists the funds you defined. Concurrently, iFund computes and ranks the funds you selected based on past 1-year fund performance, and further sorts them into 4 iSignal groups (Green, Yellow, Orange and Red). Green iSignal is for the top performing first quartile funds, yellow iSignal for second quartile, orange iSignal for third quartile and red iSignal for underperforming fourth quartile funds. Funds with less than one year track record are not counted and signaled.

If the number of funds is divisible by 4, each iSignal group would have the same number of funds. If the dividend is indivisible by 4, then iSignal rounds up in favor of higher quartiles. Thus the number of funds in the green iSignal group will be equal to or more than those in the red iSignal group.
 

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Example

 

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Risk Statement and Disclaimer:
By using this information, you confirm that you accept the Terms of Use as set out in https://www.ifund.com.hk. Investment involves risk. Past performance is not indicative of future performance. Fund prices may move down or up, may fluctuate dramatically, and may become valueless. It is as likely that losses will be incurred rather than profit made as a result of buying and selling funds. Some funds are denominated in RMB which are currently not freely convertible, and are thus subject to risks associated with RMB including RMB foreign exchange risk, RMB hedging risk, offshore RMB ("CNH") market risk and RMB trading and settlement of fund units risk. Funds which are invested in emerging markets and smaller companies may also involve a higher degree of risk and are usually more sensitive to price movements. Before making any investment decision, investors should carefully read the prospectus and the offering document for further details. Investors should undertake their own research and study before trade or invest. Investors should carefully consider whether trading or investments are suitable in light of their own financial positions and investment objectives, and understand that they shall be wholly responsible for their investments. Investors are advised to seek independent financial and professional advice before trade or invest. The information herein does not constitute investment advice, or an offer to sell, or a solicitation of an offer to buy any security, investment product or service nor a distribution of information for any such purpose.  The website contents are prepared and issued by Noble Apex Advisors Limited. Informational sources are considered reliable but you should conduct your own verification of information contained herein.  This website and advertisements contained herein have not been reviewed by the Securities and Futures Commission of Hong Kong.

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