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Morningstar UK launches synthetic risk reward indicator calculation for Ucits funds

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Morningstar UK, a subsidiary of Chicago-based Morningstar, Inc, has launched its calculation of the Synthetic Risk Reward Indicator (SRRI) for Ucits funds. The launch follows the European Union’s introduction of the Ucits IV regulations on 1 July that require all Ucits funds to provide a SRRI score as an integral component of the incoming Key Investor Information Document (KIID), which becomes obligatory between now and 1st July 2012.

Andy Pettit, director of pan-European data and research strategy for Morningstar says: “Producing our own SRRI calculation provides an independent and consistently applied interpretation of the Ucits IV directive across all applicable fund company investment products. The prescribed SRRI specification from ESMA leaves considerable room for interpretation in how funds are mapped into the ESMA fund types and in how performance is back-filled for funds less than five years old.

"The specification also gives fund companies the freedom to choose any start point for their official SRRI calculation of between 1 July 2011 and 30 June 2012. These variables are likely to cause inconsistency in SRRI calculations across the industry, despite the best intentions of the SRRI to be a meaningful figure that is universally comparable. Our calculation shows a continually up-to-date position from the outset of Ucits IV and reveals the weekly SRRI values that would otherwise be invisible. We believe this offers the market greater granularity in the analysis of the official numbers.”

The Morningstar calculation offers an independently produced SRRI that is calculated in accordance with the general methodology defined by the European Securities and Markets Authority (ESMA) and applied consistently across Ucits funds. It is produced on Morningstar’s KIID Production Platform and made available to institutional clients through Morningstar Integrated Web ToolsTM and Morningstar Licensed Data feeds.

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