The origin of these awards dates back to 1999, the same year as the arrival of the euro. Spurred on by Le Monde, a consortium of European newspapers launched the "Eurofonds" initiative. The idea was to publish a quarterly ranking of the best performing investment funds marketed in Europe. This performance was calculated based on the risk taken by the managers, and the funds were classified into categories corresponding to their investment universe. For example, there were categories of European equities, international equities and long-term bonds. Rankings were based on statistical calculations, not on statements by fund promoters such as those by major rating agencies like Morningstar. That allowed excluding bias and any conflict of interest.
The European Fund Trophy was a logical development, distinguishing the performance of funds and their promoters over time. Although not launched until 2007, it was to have a sufficient track record to establish such a record. For a fund to receive 5 stars in the Fundclass methodology, the highest rating, it must first be performing. A performance established by the ranking. And above all regular. This consistency is rewarded with the award of stars.
On a scale of 5 stars to -2 stars, only 5- and 4-star funds guarantee regular returns for investors. They are the exception in the universe of funds marketed in Europe-- 30% at most. At 3 stars, there’s effective protection. But after that, money is lost.
Of the 140 categories in the Fundclass ranking, only five categories are highlighted. These are the most representative of the expectations of the readers of the press organisations accompanying the European Funds Trophy. This year’s categories include American equities, European equities, emerging equities and bonds.
For the ranking of management companies, it’s the range which is scrutinised. Management companies are divided into eight categories according to size. Then the number of starred funds in the ranks. The trophies of the best management companies take into account a period of four years. A second prize, the Fundclass Trophy, refers to the past seven years. Finally, there are two prize levels, national prizes and European prizes.
What sets the European Funds Trophy apart from other trophies popping up in the world of investment funds? Independence. The method, based on complex statistical calculations, presents a major difference compared to that of large rating agencies such as Morningstar or Lippers, for example: it is not based on the declarations of the managers--who pay these agencies for their ratings--but is made on objective and neutral calculations which compare what is comparable and which testify to the reality on the ground. If a manager claiming to be in European equities is actually taking their risks in emerging markets, this is the category in which they will be ranked and compared to their peers. In addition, the declared performances are restated according to the risk incurred.
The European Funds Trophy has a long history with Luxembourg. Jean-Claude Juncker chaired the first award ceremony. "The investment fund industry is an industry of great interest to my country," he explained at the time. Luc Frieden, Pierre Gramegna and Nicolas Mackel have also held this role over the years. The director of Luxembourg for Finance will also chair the 2021 edition.
This year, in addition to Delano and Paperjam, Maison Moderne publications, the following media are associated with the event: Le Monde Argent, La Stampa, Le Temps, El País and LCI. The event will take place via a livestream.
This article was originally published in French on Paperjam.lu and has been translated and edited for Delano.