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Research and Testing
Research
There has been extensive research into
persistence of mutual fund performance as found at
www.mccombs.utexas.edu,
and in
Wermer 2003,
and
Wermer 2004.
as well as other
sources. Certain attributes have
been shown to have positive correlation with future risk-adjusted
performance over short to intermediate time periods. These research
results were used in the development of the Klein Fund Ratings.
The Klein Fund Ratings (KFR) were developed by
Klein Decisions, LLC in conjunction with the patented K4
investment decision process. used in
K4 Fund Selection along with
industry and proprietary research. By using the K4
process KFR is the first rating system that simultaneously
considers multiple factors and the relative importance of each factor
combined in a single rating score. Klein
Fund Ratings Methodology details the methodology used in the Klein Fund
Ratings
Historical Test 2001-2004
Historical testing
of Klein Fund
Ratings from 2001-2004 indicates that::
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Generally, funds
that receive a 5-star Klein Fund Rating have higher cumulative
alpha, than funds with lower ratings.
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Average subsequent
year alpha is generally better for funds with a 5-star Klein Fund
Rating than for lower rated funds.
-
Probability of
positive alpha is generally better for funds with a 5-star Klein
Fund Rating than for lower rated funds.
Historical Test Results
Results for each style
category tested are available in:
The graph below shows the cumulative historical
alpha for the Small Cap Growth category as calculated for the year
following the year that a fund received a particular Klein Fund Rating.
The graph starts with a value of 100 at year end 2001 and links the
average alpha for each subsequent year, 2002 – 2005, using the same
methodology that is used for linking returns. For the Small Cap Growth
category, the funds that received a 5-star Klein Fund Rating
(«««««)
all had higher cumulative risk-adjusted return (measured using alpha),
than any of the other ratings.
Klein Fund Ratings and
Klein Fund Ratings Historical Tests are based on past performance. Past
performance is not an indicator of future performance. Investors and
advisors should consider the Klein Fund Ratings as only a single factor
in making investment decisions. The information contained herein is not
represented or warranted to be accurate, correct, complete, or timely.
Klein Decisions, LLC, shall not be responsible for investment decisions,
damages, or other losses resulting from use of this information.
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