Press Release

CFRA Announces Major Updates and Enhancements to its Industry-Leading ETF Research Offering

27 January 2020
New ETF rating system more closely aligns to firm’s stock and mutual fund research; Machine learning techniques enable users to identify those ETFs with consistent records of outperformance in both up and down markets

NEW YORK, January 27, 2020 – CFRA, one of the world’s largest providers of independent investment research, today announced a number of significant enhancements and updates to its industry-leading ETF rating methodology and client offerings.

The ETF new rating approach blends CFRA’s proprietary forensic and fundamental approaches, including forensic earnings quality scores and STARS (Stock Appreciation Ranking System), which offer a proven approach to equities analysis. Ratings will be updated on a monthly basis using a machine-learning model with the goal of identifying the funds with highest probability of outperformance of its equity or fixed income asset type.

“For the past decade, CFRA has provided a unique, forward-looking, holdings-based approach to researching and rating ETFs and we’re now able to dig even deeper on behalf of our clients,” said Todd Rosenbluth, Head of ETF & Mutual Fund Research for CFRA. “We will continue to include fund-specific characteristics and forward-looking metrics in the assessments of all 1,800 ETFs under our watch, including expense ratios and other costs, and we will also continue to rate ETFs within just a few months of its history. But with our new rating methodology in place, we will also now be able identify those ETFs with consistent records of success in both up and down markets, something we believe will resonate well with investors and advisors as the return of volatility seems likely to be on the horizon.”

“CFRA is pleased to provide the market with a new rating methodology that reflects the marriage of our analyst’s subject matter expertise, robust accounting analysis, and our unique and proprietary ETF data,” explains Zach Gast, CFRA President. “Our ratings of more than 1,800 ETFs will help investors navigate the ETF investment landscape in a system designed specifically for ETFs, considering critical factors across Reward, Risk and Cost sub-categories to assess a fund’s position relative to peers.”

In addition to making these research methodology and rating enhancements, CFRA has also made a significant change to the rating system itself, moving from a three-tiered weighting system for ETFs to a five-tiered star system. An ETF rated with 5-STARS means that the total return is expected to outperform a similar group of ETFs over the next nine months, while an ETF rated with 1-STAR indicates that the total return is expected to underperform similar group of ETFs over the next nine months.  

“Rating stocks and mutual funds on a scale of one to five stars is something our clients have gotten very used to, so it only made sense to take this opportunity to bring that same five-tiered approach to ETFs,” added Rosenbluth. “Coupled with our proprietary ETF data, this approach allows us to bring more nuance to the recommendations we make and for clients to better distinguish among those funds that appear best positioned for future outperformance.”

Notably, the data used to power CFRA’s ETF rating methodology is built upon proprietary content from CFRA’s acquisition of First Bridge Data in August 2019. With the integration now complete, clients can access the industry’s most comprehensive database of ETF constituent holdings data, reference and classification data, investment analytics, and daily pricing, flows and statistics. The classification data is particularly valuable for ETFs, moving beyond style boxes to reflect the real-world investment criteria of investors. CFRA clients can also use  powerful data visualization tools, which allow for the creation of interactive reports by region, by category, and more.

Ratings following the new methodology will be featured in CFRA ETF research reports beginning in Spring 2020.

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CFRA is one of the world’s largest providers of independent investment research. Through a differentiated methodology blending forensic accounting and fundamental equity research, CFRA empowers sophisticated investment professionals, advisors and risk managers with actionable analysis and proven results.

CFRA’s global research team of 75 analysts critically evaluates industries, funds and companies of interest to help over 2,000 clients, including the world’s leading institutional investors, wealth advisors, corporations, academics and governments, to make sound investment and business decisions.

Founded in 1994, CFRA is privately held with offices in or near New York, London, Hong Kong, Kuala Lumpur, Charlottesville, Denver, and Washington, D.C. In October 2016, CFRA acquired and has since fully integrated the Equity and Fund Research business from S&P Global.

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