Fund risk ratings explained - The Share Centre

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Choosing a fund which suits your attitude to risk

To help you find a suitable fund, we provide risk ratings for all the funds in our Platinum 120 and weekly fund in focus. The funds fall into three categories:

  • Lower risk (L)
  • Medium risk (M)
  • Higher risk (H) 

Within each category, funds are classified according to their size and the different types of investments they contain. The higher the number, the higher the risk (and potential to be more volatile):

Our risk ratingType of fundDescription
 L1Cash / Money  The lowest level of risk and volatility.  
 L2UK Gilt and Sovereign Debt
Predominantly contains UK Government Gilts of varying maturity.
 L3Corporate Bonds
Invests in companies which issue debt to raise capital. Underlying assets need to be considered: funds which primarily invest in ‘Investment Grade’ debt will tend to be less volatile and at less risk of company defaults compared to those which focus on ‘Non-Investment Grade’ debt.
 M4Property
Invests directly in bricks and mortar or property company shares. May include overseas holdings.
M5

UK Equity

 

Global Managed

Focussed on the UK, investing in
large FTSE 100 companies through to small AIM/Fledgling FTSE companies.

Must be diversified by geographic region, even where a style or theme exists e.g. a focus on an industry sector.

M6EuropeanLook to invest across Europe, excluding the UK.
M7North American
Focussed on North America, however investments may occasionally be outside this geographical area.
H8Asia
Includes countries such as Japan, Australia and developed economies from Asia (excluding China).
H9Emerging Markets
Predominantly contains investments which focus on developing and emerging economies such as BRIC (Brazil, Russia, India and China).
H10Specialist
Focussed on investments which are specialist or specific to an industry or physical asset e.g. Commodities or Technology (excluding property).

How we rate the funds

We use a range of news, analysis and research tools to rate funds. Our primary source is Financial Express Analytics, but we also meet regularly with the various Fund Houses. Fundamental data used includes: beta, alpha, Sharpe ratio, Treynor measure, Jensen measure, performance comparative to benchmark and sector, positive and negative periods, r2, tracking error and downside risk.

To find out more about how we arrive at our views on investments and risk, please read our investment research policy.