AIC Sector Performance figures

[mc2fool]

DavidM13,

The AIC site shows sector averages, which it says are size weighted, and it shows the performance sector averages both at the top of Find and compare investment companies and in the Sector performance table under the Performance tab of each individual company page. All fine and fair enough.

However, the chart under the Performance tab, rather than showing the AIC sector averages, shows instead the relevant Morningstar IT sector performance, which can be quite different.

For example, and as a random choice, for folks that wonder what I'm talking about, in the Aberdeen Smaller Companies Income performance page the chart shows the Morningstar IT UK Smaller Companies 1 year performance as 10.33%, NAV 21.48%, whereas down the page the 1 year Sector performance is shown as 28.1%, NAV 19.8%. Folks will see the 3Y, 5Y and 10Y figures are also quite different between the two.

Ok, so, a few things:

Firstly, I couldn't find anywhere an explanation of how the Morningstar IT sector figures are arrived at.

Secondly, why have two (quite different) sector performance figures anyway? Yes, I'm sure there's some technical reason, like the AIC ones are calculated internally whereas it's Morningstar that's providing the chart, but look at it from a user's perspective: the Sector performance table shows one thing but the chart shows another.

Thirdly (and I'm sure the answer to this is related to the above, but I'll ask anyway!), why can't I select the AIC sector averages for the chart? I'm only given the choice of Morningstar sectors or other ITs.

And, tangentially, I was going to ask where has the link to the Glossary gone, but I finally found it (under the three horizontal lines menu drop down), but even then I only found it 'cos I went to the Site Map and searched for Glossary and on seeing that Firefox found 1 match but it wasn't on the visible part of the page I started traipsing through the drop downs.

So, may I suggest, (a) making the Glossary easier to find, e.g. include it in the Home Contact us Terms of use etc line at the bottom of each page, and (b) including Glossary in the Site Map! Oh, and BTW, there's no entry for "Sector" in the glossary....!

[DavidM13]

Good Morning!

Let me attempt to answer some of these:

1) Both calculations are from Morningstar but on a slightly different methodology. The Chart uses their PGIs (Peer Group Indices) which are based on proprietary index methodology and show no survivorship bias. It is a daily total return series which is weighted slightly differently than the standard AIC sector which also only has survivors. They should be similar but not the same. Your example is not similar and I have escalated to Morningstar to try and understand why this may be the case.

2) I have already put the glossary at the bottom of the website as you suggested. We are also looking at site map improvements in the coming months.

3) You cant add the AIC sector averages to the charts as they are standalone figures for discrete periods. They are not an index. That is why we use the aforementioned PGI for charting purposes.

4) We do now have a special section of the website for the AIC sectors https://www.theaic.co.uk/aic/statistics/aic-sectors

Finally, as a Christmas treat to all us lemons next week we will be putting Market Indexes on our website for comparative purpose for our equity funds.

[mc2fool]

Thanks for the quick reply -- and esp. for the quick additional of the footnotes link to the glossary

1) Both calculations are from Morningstar but on a slightly different methodology. The Chart uses their PGIs (Peer Group Indices) which are based on proprietary index methodology and show no survivorship bias. It is a daily total return series which is weighted slightly differently than the standard AIC sector which also only has survivors. They should be similar but not the same. Your example is not similar and I have escalated to Morningstar to try and understand why this may be the case.

So, IIUC, the big difference is that the Morningstar sectors are an ongoing "index", handing drop-outs and new entrants in a similar fashion to most indices, i.e. with no jump/drop in the index as a result of demotions or promotions, and hence without survivorship bias, whereas the AIC sector figures are simply a snapshot of the constituents of the sector at the time and have no consideration for past members. In addition they are weighted differently and, in the case of the Morningstar sectors, are opaque in that they are based on a proprietary methodology (which, presumably Morningstar doesn't publish?).

Ok, well I think at the very minimum you should have an explanation somewhere on the site as to why there are two different sets of sector performance figures and what they mean.

You might also consider whether it might be a good idea to either just go with one or the other throughout the site -- or always present both throughout. E.g. including the Morningstar figures in (or maybe under) the Sector performance table under the Performance tab of each individual company, and maybe having an additional line below Sector averages in the Find and compare screen showing the Morningstar sector 1/5/10 year performance figures.

Either way, I think having the chart show a pair of sector figures that are different -- and often quite so -- to those shown in the sector performance table on the same page is confusing, as is.

And if you look at other sectors you'll find that my example is far from the only one, and it seems that the big(ger) discrepancies (at least at the ones I've looked at) are in the share price figures, the NAV figures are usually more similar.

[DavidM13]

I believe I know what has happened here. I think Morningstar recently upgraded their graph plug in and accidentally wired in the unweighted rather than weighted price series. This would explain why large differences only happen to the market price index. This is not confirmed so bear with me while I liaise with them and get a confirmation/fix.

You are right that the sector averages have survivorship bias but as I say normally they should be very close anyway and not a material difference. For example how many funds have launched/changed in the smaller companies sector over the last 1 y? Not many, not enough to make such a big difference.

I will look to put something up on the hover definition when we launch the indices next week pointing out the differences but in the meantime the priority will be to understand what series is being displayed.

Thanks for flagging.

[DavidM13]

Morningstar are still looking at this but I am confident my theory holds.

Meantime we have put up comparative market indices due to popular demand.

[DavidM13]

They have scheduled a fix but not live until 15th January. Apologies for the inconvenience and thanks for flagging

[DavidM13]

They fixed up the charting issue and the two sets of numbers should be far more in line now. We are hopefully upgrading the charting package soon so you will have some more exciting things to graph.

[mc2fool]

They fixed up the charting issue and the two sets of numbers should be far more in line now. We are hopefully upgrading the charting package soon so you will have some more exciting things to graph.

Good news, kinda busy right now but will check it out when I get a spare mo or two