Mutual Fund Ranker Workbook
Mutual Fund Ranker was modeled after the quantitative screening processes used by institutional investors to identify investment managers that best suit their unique objectives and preferences. Mutual Fund Ranker was uniquely designed to allow users to quickly and easily rank and iteratively compare mutual funds using their own preferred investment characteristics across multiple benchmarks and time horizons. The unique flexibility of Mutual Fund Ranker allows users to simultaneously express their statistical and time horizon preferences. Results are presented in unambiguous rank order.

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Flexible Parameters
The majority of investment scoring tools rely on single historical performance statistics, single benchmarks and single time period data. While each performance statistic contains useful information, none is individually sufficient for prudent investment decision making. Investment performance is highly time period sensitive. Therefore, performance information relating to a single time period can be of limited value.

Multi-parameter analysis provides a superior context for understanding investment performance and for establishing future expectations. Mutual Fund Ranker allows users to include up to 10 fundamental and historical performance related statistics in their ranking process. The statistics may be weighted from 0% to 100% to fit each user's preference. The statistics are explained in the glossary below. Mutual Fund Ranker allows users to rank mutual funds using customized time horizon preferences to the extent permitted by history of each mutual fund. The History Bar included in Mutual Fund Ranker allows the user to determine, at a glance, the confidence level they should associate with a statistical ranking based on the length of its performance track record.

Mutual Fund Ranker Glossary

Mutual Fund Ranker ranks mutual fund performance statistics based on their relationship to either a Market Benchmark or a Style Benchmark. The Market Benchmark is a single asset class benchmark that is broadly representative of each mutual fund category. The Style Benchmark is a mix of asset class benchmarks that correlates to each mutual fund’s specific market exposures. All Mutual Fund Ranker statistics are related to the category market benchmark unless indicated as Style.

Correlation - statistic indicating the degree to which the mutual fund performance is related to market benchmark performance. The higher the statistical correlation between a mutual fund and the market benchmark the more reliable the performance statistics, though high correlation may also be indicative of “closet indexing”.

Downside Risk –  Post Modern Portfolio Theory volatility of returns below the mean.

Sharpe Ratio – The Sharpe Ratio, developed by Professor William F. Sharpe, provides a comparative measure of risk adjusted returns. For similar funds, the higher the Sharpe ratio ranking the more effective the returns.

Alpha is the component of an investor's return  that is due to the skills of  the mutual fund  manager as distinct from its expected risk adjusted returns, due to the market. For similar funds, the higher Alpha rankings can reflect higher excess returns.

Information Ratio -  A risk-adjusted measure of fund manager performance. It represents the value, per unit of extra risk assumed, that the manager's decisions have added above benchmark returns. For similar funds, a higher Information Ratio ranking may reflect more consistent and reliable excess returns.

Batting Average – The fund’s batting average measures the percentage of time a fund beat its benchmark over a given period. Higher batting averages may indicate greater performance consistency though this will often depend on the funds strategy, holding concentration etc.

Tracking Error - The standard deviation of the difference between the performance of the mutual fund and its market benchmark.