Mediator zaps star wars
The two managed fund research houses have sat down together and resolved their differences over their star rating systems.
Wednesday, June 17th 1998, 12:00AM
The two managed fund research houses have sat down together and resolved their differences over their star rating systems.FPG Research and IPAC Securities been to mediation and have signed a legally binding document over the use of star ratings.
Neither party is allowed to comment on the mediation further than an agreed statement. It says: "in the interests of the funds management industry and investors FPG and IPAC have agreed to resolve their differences with respect to star ratings."
However, both have had to give ground. FPG has withdrawn its threat of legal action against IPAC, but it will continue to market its ratings as stars. IPAC will continue to use stars as the symbol in its ratings, however it won't call its system a star rating system.
As part of the agreement FPG and IPAC have agreed to a framework to clearly define how their respective star ratings are derived.
FPG tries to predict the future by using a model that includes quantitative and qualitative data, while IPAC's is a ready-reckoner of past performance on a risk-adjusted return basis.
The mediation came about after FPG complained to the Investment Savings and Insurance Association about IPAC's system.
It claimed having two star rating systems was confusing for investors and the public.
While the ISI did not support one system over another it did facilitate the mediation process which was run by a lawyer as a professional, independent mediator.
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