A study of fund ratings services offered by Standard & Poors, Lipper, Morningstar and Aptimum, concludes that these fund ratings do not differentiate between market performance and managerial skill, making them unreliable and irrelevant.

The study by Edhec, a French business school, found that ratings do not take into account things like potential for extreme loss in a fund or the investment styles of funds. "The ratings do not take into account the real risk to which the funds are exposed, and therefore give irrelevant information on the risk-adjusted performance of the funds," said Noel Amenc, director of the Edhec Risk and Asset Management Research Centre, and joint author of the study.

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