How to Read a RIPPL Effect Report
Author: Kirsty O’Hara
Written: 29 07 2022
5 min read
RIPPL Effect reports inform investors on how an investment might perform.
For many investors the most exciting thing about Flint is the insights made available, to assist and inform DIY investing decisions.
We always encourage investors to take their time doing due diligence on funds, as these resources may shape your personal investment strategies and long-term investment goals.
One way we share insights with investors, is by hosting complimentary RIPPL Effect reports from one of Flint’s founding partners: Research IP.
Research IP comment: ‘The RIPPL (Research IP Pty Ltd) Effect is designed to be a free offering for financial advisers and consumers. The RIPPL Effect is designed to bridge the gap between our Quantitative Tear Sheets and full Qualitative Research Reports. The idea is to provide a simple summary of every fund in the market. We collect simple data points and put them in the same place on every report, in particular key information typically found in the PDS, SIPO, or on the manager’s website, but often hard to find’.
‘It is about you, it is your money, it is your choice. Be informed to sleep well with your choices.’ – Research IP
As well as RIPPL Effect reports, every fund on Flint also has a Product Disclosure Statement (PDS), which is a regulatory document that provides you with essential information - to help you decide whether to invest in a financial product. Some funds also include a more detailed Qualitative Research Report, which includes a rating and opinion, written by Research IP. These reports are available on Flint and also linked directly through the RIPPL Effect reports (we will write more about these in a later post).
While Flint recommends that all investors read the PDS we realise that these multi page documents can be a lot to take in. The RIPPL Effect can act as a great accompaniment to the PDS and provides information that includes: investment strategy; fees; ESG credentials; and performance [etc.]. The purpose of this information is to help you make an informed decision about the fund you are looking to invest in.
It is important to acknowledge that these RIPPL Effect reports sit within each fund’s summary sheet on the Flint app, alongside other insights. To read about the other insights available on Flint, including Research IP’s qualitative reports, please see our DIY investing? Insights can help article.
3 Key Benefits of reading a RIPPL Effect:
1) Complimentary Insights: Flint users can enjoy RIPPL Effect reports free of charge.
2) Identical Formatting: investors can compare relevant information, with key details presented in the exact same font and format. This saves time for investors who no longer need to trawl through the PDS for a specific item of interest. Advisers comment that they find it easier to quickly refer to when comparing funds across fund managers.
3) They are curated by Research IP: Research IP is a global research, consulting and technology business, which offers a range of products and services to the financial services industry. They have provided client focused qualitative and quantitative financial product and security research since 2015.
Research IP are used and trusted by investors & financial advisers for investment, KiwiSaver, Superannuation and other Pension schemes throughout the Asia Pacific region.
Research IP state that they “have grown their team and footprint by utilising the specialist skills of analysts to include: data scientists; equity, bond, and alternative asset specialists; portfolio managers; asset allocation analysts; and ratings specialists”.
Their approach and offering has been shaped by over twenty years of collective industry experience, across different facets of the financial sectors, and as a result the Research IP team understand the key drivers and challenges across the Financial Advice industry.
8 Focus Areas: Let’s unpack a RIPPL Effect report:
1 ‘Meet the Manager’
If you’re after a high-level introduction, this is where it lives. RIPPL provides a half page overview about the fund manager, in a succinct format. It gives you a good introduction, and generally shares a little about the guiding philosophy and unique benefits specific to that fund manager.
2 ‘The Fund’s Profile’
If you’re asking ‘do these guys have a skin in the game?’, and ‘what is their investment style?’ then this section provides an overview of where this fund sits within the broader spectrum of investments. There is a lot of variance within the investment landscape based on a fund’s geographic and specific areas of focus (be it Shares, Mixed Assets, Property & Infrastructure, Bonds, and Equities).
Fund Focus: It’s important to understand that different funds have a different focus or ethos. If methodologies such as Environmental Social Governance (ESG) or socially responsible investing (SRI) matters to you, then Page 7 goes into more detail on anything ESG or SRI related.
The Fund’s Profile table will begin by sharing who is accountable for the fund, and usually offer a bio on this key staff member. This section will then move on to outline some specifics relevant to the leadership, geographical nature, and management of that fund – to include details such as:
- Is the Portfolio Manager invested in the Fund?
- Is the Fund a registered NZ PIE structure?
- Is the Fund open to new or existing investors?
- The asset class that the Fund primarily invests in
- Product's investment style
- Geographical focus
- Investment focus
- Manager's ownership structure and time in an asset class.
3 ‘Under the Bonnet’
Everyone loves a good car analogy, RIPPL included. This section includes a short blurb on the weighting of the fund, and may include a mention regarding potential volatility (if relevant depending on the fund).
Two tables outline things from benchmarks, to targeted returns, and buy/sell spread information. These tables include (but are not limited to) the following overviews:
- Suggested minimum investment horizon
- Performance fee/s (if relevant)
- Is there a high-water mark*?
- Product's current buy/sell** spread
- Distributions per year (if relevant)
- Normal pricing frequency
* Research IP explain a high-water mark as: ‘(In reference to a performance fee) This is the highest value a fund has achieved. Any performance fees are only payable if the fund return reaches this mark plus the hurdle rate. This should not be resettable’.
** A buy/sell spread is explained by Research IP as: ‘These are costs charged to entering/exiting investors to cover transactions costs for underlying investments. The reason for the buy/sell spread is to fairly attribute the costs to the investors entering/exiting and NOT all other current unit holders in the fund’.
The second ‘Under the Bonnet’ table outlines the Management Fees - and includes Historical and Estimated fees relating to: basic fees, management fees, any performance fees; and then totals these to show total fund charges with a relevant date.
4 ‘Does Size Matter’
This age-old question, and indicator of social traction, is a common go-to consideration for most investors. We all want to understand if we have the support of the pack. Here you will find a nice handy snapshot of FUM (funds under management). This is broken down into sub-categories such as:
- Current size of the Fund ($m) NZD
- Current FUM in the strategy, including mandates ($m)
- Current total FUM of the Manager ($m)
Research IP share their thoughts on fund size, with their Does Size Matter blog, and talk about the key areas that make up the investible universe and fund attributes that a fund can be limited by. They highlight that: “Just like in life, bigger is not always best”.
Helpful Reader Note: When reading a RIPPL Effect Report (or a PDS) If you hold down the Ctrl key on a PC - when you click on any of the links within a RIPPL Effect report - it will open the link in a new tab, and save you from having to find your way back to your original spot in the reports.
5 ‘The Downside’
Here RIPPL talks briefly about risks relating to investing. It includes a Risk Indicator chart, and shows where this specific fund falls on the Risk Indicator’s 1-7 spectrum:
Research IP explain: “The Risk Indicator is sourced directly from the manager and is rated from 1 (low) to 7 (high). The rating reflects how much the value of the Fund’s assets goes up and down (volatility). A higher risk generally means higher potential returns over time, but more ups and downs along the way. Even the lowest category does not mean a risk-free investment, and there are other risks that are not captured by this rating. This risk indicator is not a guarantee of a Fund’s future performance. The risk indicator is based on the returns data for the latest 5 year period. If the fund does not have a 5-year return history market index returns are used to supplement the return series. The risk ranking applies to NZ PIE fund structures only, Research IP does not apply the risk ranking methodology to replicate this outcome in any other jurisdiction”.
The FMA further outline the criteria for risk ratings here.
Please note: every RIPPL Effect report will direct you to the same blog about Investment Risks to Look Out For. As suggested above - to ensure clicking doesn’t override where you are at in the report, please hold Ctrl when you click on any highlighted hyperlink text.
6 ‘Is it Ticking?’
If you value sustainability, and social governance, then this is the page you want when considering ESG (it unpacks the ethical aspect of the fund – to include UNPRI, RIAA, Mindful Money). If relevant it may include a short blurb about how the fund philosophy sits alongside the following table of industry affiliations and responsible investing benchmarks. The ESG Information table includes (but is not limited to):
- Which EU Sustainable Finance Disclosure Regulation (SFDR) classification best describes this product?
- Is the Manager a signatory to the UNPRI?
- UNPRI Rating: Strategy & Governance
- UNPRI Rating : Listed Equity – Incorporation
- UNPRI Rating : Listed Equity – Active Ownership
- Are the UN Sustainable Development Goals considered in the investment process?
- Does the Manager incorporate ESG factors into analysis and decisions?
- Does the Manager implement positive or negative screening?
- Does the Manager invest for impact? i.e. target nonfinancial outcomes that are intentional, measurable and additional. Or does the manager integrate corporate engagement?
- Is the Fund RIAA Certified? And if so, what is the investment approach?
- Link to Disclose and Mindful Money (NZ only)
If you are interested in this topic, Research IP have written an insightful paper which can be found here https://research-ip.com/responsible-investing/.
7 ‘Does it have a Pulse?’
Here RIPPL provide a broad overview on the research and philosophy of the fund – and any guidelines and screening applied. A short table then covers the following specifics:
- Third party inputs used?
- Primary and secondary valuation approach/es
- Number of securities in the investment universe
- Typical number of holdings in the portfolio
- Anticipated portfolio turnover
- Typical level of cash held in the portfolio?
8 'Is it working?’
Seriously, is it?! Any investor wants to know the answer to this. And section eight is the home of performance tables, and graphs that show annual and annualised performance.
Performance is tabled to include the following areas:
- "Performance to" date
- Negative Months?
- Max Gain and Max Loss Since Inception
- Volatility (3 Years)
‘About Research IP’
This section is the same on every RIPPL report; and is a great overview of the philosophy and guiding principles of Research IP to feel reassured in the quality of the content provided.
While you may enjoy reading it the first time you encounter a RIPPL report – the good news is that when reading future reports you can tick these last two pages off, as they are always the same - and know that you really only need to consider pages 2-9 where information will be fund specific.
RIPPL Effect reports are just one of the many insights available to investors on Flint. We understand that there can be a lot to read when you are discovering fund options and conducting due diligence. As a DIY investor it can possibly be overwhelming at times, however we do enjoy hearing customers comment that ‘it gets easier the further they deep-dive into the insight reports’.
When new to investing, it can be useful to keep in mind that you are still forming your own opinions on the investments that best fit your personality, risk profile, age and stage. After some time, you may find that you have a clearer understanding of which fund managers and specific funds best suit your values and long-term financial goals. We hope all our investors look back and feel grateful for time invested in reading and information gathering when considering investments, especially in the early days.
As always, we are unable to give you advice around investing – and suggest you see an authorised financial adviser if you are feeling uncertain and think DIY investing is not quite right for you.
If you have a questions relating to RIPPL Effect reports or the Flint app, our team are always happy to help.
IMPORTANT NOTICE AND DISCLAIMER:
All content shared is of a general nature, current to the time it was penned, and is not financial advice. Before making any investment decisions, please be sure you have completed full due diligence. This should include reading the product disclosure statement (PDS), considering fees and taxation, identifying your time horizons, and understanding the performance history and reputation of the investments you are considering.
Please note: When investing you are not guaranteed to make money (and on occasion you may lose some or all of the money you began with). Seek independent advice to establish if an investment is suitable for your financial situation and long-term wealth generation goals.