Quote: Foreign institutional clients' opinions were not considered - except where they managed assets in SA
Both the principles and the structure of this survey are consistent with those applied in previous years. All the rankings and other findings are based entirely on a poll, by questionnaire, of the opinions of the SA brokerage firms' domestic institutional clients.
Research sectors covered are comparable with last year's, though equity sector names have changed in line with changes in the JSE's official sectors.
WHAT IT MEANS
 28 institutions participated
They manage assets of over R2,47 trillion
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Many of the broking firms produce investment research, or have offered other services such as dealing, for foreign clients. However, foreign institutional clients' opinions were not considered for this survey, except where they might have been managing assets in SA.
The structure of the survey is devised largely by the FM. Markinor, the independent market research company, took overall responsibility for the processing of the data and compilation of the results. Spreadsheets were designed and run by Vickie Watt of Training Services & Solutions. The SA Bureau of Standards has carried out an independent audit of the processes.
The questionnaires were distributed, in electronic form, in March. As the intention is to capture a house view rather than the diverse opinions of individual fund managers and buy-side analysts, a single copy was sent to a senior manager at each institution. The respondents were asked to return a single, co-ordinated response directly to Markinor.
Questionnaires were sent this year to 28 financial institutions and asset managers, including life assurers, banks, retirement fund managers, large pension funds and some hedge funds. At the cut-off at the end of April, 28 completed questionnaires had been received, giving a record return rate of 100%.
Based on data stated on the returned questionnaires, organisations that participated manage domestic assets total-ling R2,47 trillion, and their personnel include 208 fund managers and 212 buy-side analysts.
Before compiling the questionnaires, the FM asked JSE member firms, known to be involved in institutional research, for the names of their investment analysts and the sectors covered by those analysts over the past year.
The analysts' names were included, alongside their firms' names, in each research sector in the questionnaire.
In each of the research sectors covered, respondents were asked to nominate and rank the best five firms and, separately, the best five analysts, taking into account the following criteria:
- Quality of written fundamental research in terms of content and value;
- Accuracy of forecasts and value of buy/sell recommendations;
- Effective communication, both written and verbal; and
- Consistency over the past 12 months.
Points were allocated according to the ranking, ranging from five points for a first place to one point for a fifth place.
In the sections covering institutional sales teams, dealing and back-office administration, respondents were asked to nominate and rank the firms they considered to be in the best 10. For these sections, names of potential candidates were not included in the questionnaire.
Two separate forms of weightings were used. First, to take account of the concentrated structure of asset management in SA, the responding institutions were weighted according to the value of their domestic assets managed. The number of weighting bands was again 12.
All the rankings for research, sales teams, dealing and administration have again been presented in two ways: with the institutions weighted and unweighted, with all the respondents treated equally.
Moreover, the key brokerage functions of research, dealing and administration are treated separately. There is no overall ranking incorporating all three.
A second form of weighting is applied to the research sectors when calculating the overall rankings of firms for research. First, a firm's ranking based only on accumulated points treats all the research sectors equally, with no weightings applied.
This is the most objective of the firms' overall rankings, as it involves no judgments about sectoral weightings, and is not influenced by exogenous factors such as market movements over the year.
Second, an equities research ranking is derived from coverage of the equity sectors listed on the JSE.
As in the past three years, these sectors were weighted according to the average values of their constituents in the FTSE/JSE shareholders' weighted index.
Finally, the overall ranking of firms for research, with all sectors weighted, is derived from the points gathered by the firms across all the sectors in the survey. Here, weightings based on values in the shareholders' weighted index were applied to the JSE sectors, which were assumed for this purpose to make up 70% of the total.
The remaining 30% was applied subjectively (but guided by views from respondents) to the non-JSE sectors. Weightings for these sectors were unchanged from last year. Key areas such as investment strategy, domestic economics, international economies, fixed-interest research and commodities carry the larger weightings among these.
- A longer version of the methodology appears on www.fm.co.za.
