FE fundinfo announces Passive Fund Ratings, showcasing top performing passive funds for investors
MSCI indices performed best against industry benchmarks such as the S&P 500.
FE fundinfo, a leading financial data company connecting the asset management industry to distribution networks in the UK, Europe and Asia Pacific, has announced the winners of its Passive Fund Ratings, with passive funds tracking MSCI USA and MSCI ACWI indices achieving the joint highest percentage of 5-Crown rated funds.
Around the world, passive investing is surging. According to research from The London School of Economics (LSE), passive investing has risen from around 1% of the total market (active and passive combined) in the early 90s to more than 50% today.
The rating framework assesses fund performance against industry benchmarks such as the S&P 500, providing a clear and accessible ranking system from 1 to 5 Crowns, prioritising consistency and efficiency over time. The ratings focus on key performance indicators, including Excess Return, Tracking Error and Cost, to help investors navigate the rapidly expanding passive fund market.
Top-Rated Sectors and Indices
North American Equities lead the rankings, with 54.7% of rated funds achieving the highest rating, followed closely by UK Gilts (53.3%) and Global Equities (49.1%).
Among specific indices, MSCI USA and MSCI ACWI funds stand out, with 66.67% of rated funds receiving a 5-Crown rating. The S&P 500 saw 55.17% of its rated funds achieve top marks, reaffirming its position as the gold standard in passive investing.
Passive Fund Performance by Sector:
|
Sector |
No. Rated Funds |
No. 5-Crown Funds |
Percentage 5-Crown Funds |
|
North American Equities |
53 |
29 |
54.7% |
|
UK Gilts |
15 |
8 |
53.3% |
|
Global Equities |
53 |
26 |
49.1% |
|
Japanese Equities |
26 |
9 |
34.6% |
|
European Equities |
37 |
10 |
27.0% |
|
UK Equities |
41 |
9 |
22.0% |
|
Emerging Market Equities |
29 |
6 |
20.7% |
Leading Passive Fund Providers
Among fund providers, State Street Global Advisors, Vanguard, iShares, and UBS AG dominated the rankings, with more than 60% of their rated funds achieving a 5-Crown rating.
|
Group |
No. Rated Funds |
No. 5-Crown Funds |
Percentage 5-Crown Funds |
|
State Street Global Advisors |
14 |
9 |
64.3% |
|
Vanguard Group (Ireland) Ltd |
22 |
14 |
63.6% |
|
iShares |
32 |
20 |
62.5% |
|
UBS AG |
13 |
8 |
61.5% |
|
Xtrackers (IE) PLC |
14 |
8 |
57.1% |
Unlike traditional fund ratings that consider active management skills, the Passive Fund Ratings are designed purely to assess the performance of passive funds. The methodology does not account for active stock selection or tactical asset allocation, ensuring a clear and objective assessment of how well funds track their respective benchmarks.
Charles Younes, Deputy Chief Investment Officer at FE fundinfo, commented: “Passive funds have become a compelling option for retail and institutional investors alike. We’ve seen an increased concentration in equity markets, which has led to many securing returns from the Magnificent 7 through passive funds.
“With the rise of passive investing, it is crucial for investors to have a reliable and straightforward system to compare funds. Our Passive Fund Ratings provide a clear picture of which funds offer the closest replication of major indices while remaining cost-effective. The ratings aim to enhance transparency and simplify fund selection for both institutional and retail investors.”
The Passive Fund Ratings are one of FE fundinfo’s four key investment rating metrics, including Crown Fund Ratings, Alpha Manager Ratings and the FE AdviserAsset Platinum Ratings, providing a range of well-established and impartial benchmarks to empower the financial ecosystem in making informed decisions.