The Synthetic Risk and Reward Indicator (SRRI) was defined in 2009 by the Committee of European Securities Regulators (CESR) with the aim of providing investors with a method of assessing a fund’s risk.
The SRRI measures the volatility of the fund. A higher volatility means there is greater uncertainty about the size of the changes in a fund’s value. This means that the price of the fund can change dramatically over a short time period in either direction. A lower volatility means that a fund’s value is not expected to fluctuate dramatically, but to rather change in value at a steady pace over a period of time. The table below shows the mapping between the volatility and the SRRI value. The table below shows the differences in percentages that the value of a fund may experience over one year (Annualised Volatility). The percentage is linked to the respective SRRI rating. The more limited the variation is, the lower the SRRI Rating of a fund. The higher the variation, the higher the SRRI Rating.
|1||0 – 0.49%|
|2||0.5 – 1.99%|
|3||2 – 4.99%|
|4||5 – 9.99%|
|5||10 – 14.99%|
The SRRI is calculated based on the fund returns over the last 5 years. If a fund is less than 5 years old, the returns of a comparable benchmark is used for the period before the fund was launched.