Start with the basket
We first define what the basket is intended to achieve, including its risk profile, investment horizon and intended exposure.
OUR RESEARCH METHODOLOGY
How we select the funds that go into an MFnxt basket.
A basket should not be a collection of funds chosen simply because they are popular or have performed well recently.
At MFnxt, we follow a structured process to evaluate index funds and determine whether they are suitable for a particular basket. The process considers the purpose of the basket, the fund's characteristics, its implementation quality and how it fits with other funds already being considered.
Structured process
Data-led evaluation
Investor-focused
MFnxt Selection Framework
Structured
01
Basket Objective
02
Fund Universe
03
Fund Evaluation
04
Basket Fit
05
Final Review
WHY A METHODOLOGY?
Good fund selection should be repeatable, not random.
There are many index funds available in the market. A simple list of funds does not explain why one fund was selected over another.
Evaluate the fund
Eligible index funds are evaluated using relevant fund-level characteristics and available data.
Evaluate the combination
A good individual fund may not automatically make a good basket. We also consider whether the fund adds useful exposure alongside other candidates.
Review over time
Fund and basket characteristics can change. Our methodology is designed to support periodic review rather than treating selection as permanent.
THE MFnxt PROCESS
From the fund universe to the final basket.
Our process is designed to move from broad fund screening to basket-level evaluation.
01
STEP 01
Define the basket objective
Every MFnxt basket starts with a defined purpose. We consider the intended investment horizon, risk profile and the type of exposure appropriate for that objective.
Risk profile
Investment horizon
Intended market exposure
02
STEP 02
Build the eligible fund universe
We begin with the relevant universe of index funds and apply basic eligibility criteria before deeper evaluation.
Relevant asset class
Appropriate index exposure
Growth option where applicable
Adequate information for evaluation
03
STEP 03
Evaluate fund quality
Funds that pass the initial screening are evaluated using relevant quantitative and qualitative characteristics.
Tracking Difference
How closely the fund has followed its underlying index.
Tracking Error
Consistency of the fund's tracking behaviour.
Total Expense Ratio
Cost of operating the fund.
Fund History
Operating history available for evaluation.
Fund Size
A supporting indicator of fund scale.
04
STEP 04
Determine basket fit
A strong fund is not automatically a suitable fund for every basket. We evaluate whether its underlying index and characteristics are appropriate for the specific basket.
Fund quality
Basket objective
Risk & horizon
Basket Fit
05
STEP 05
Check duplication and diversification
We do not want a basket to contain multiple funds simply because they have high individual scores. We also check whether the same index is being represented more than once and whether a fund is being considered across multiple baskets.
Same-index duplication
Cross-basket candidate overlap
Exposure diversification
Fund combination suitability
06
STEP 06
Final review and basket construction
The final basket is not simply the list of funds with the highest individual scores. We evaluate the combination against the basket's intended objective and target number of funds before finalising the recommendation.
Fund quality
✓
Basket fit
✓
Diversification
✓
Final review
✓
BEYOND A SCORE
A higher score does not automatically mean selection.
A fund may have a strong individual evaluation but still not be selected if another fund provides similar exposure or if it does not improve the overall basket.
This distinction is important: MFnxt evaluates both the quality of an individual fund and its suitability within the basket.
How the decision works
01
Fund Quality
02
Basket Fit
03
Diversification
04
Final Selection
CONTINUOUS REVIEW
Selection is reviewed. It is not set and forgotten.
Index funds, market conditions, fund characteristics and available information can change over time. MFnxt therefore follows a periodic review approach to evaluate whether existing basket constituents continue to meet the defined criteria.
Where the methodology indicates that a change needs to be considered, the basket is reviewed before any change is made.
Periodic review
Funds and baskets are evaluated at defined review intervals.
Re-evaluation
Existing constituents are not assumed to remain suitable indefinitely.
Documented process
Changes are considered through the defined methodology and review process.
OUR APPROACH
What our methodology is designed to avoid.
We don't select funds only by popularity.
Popularity alone does not determine suitability for a particular basket.
We don't select solely on recent returns.
Short-term performance is not the sole basis for evaluating an index fund.
We don't assume every high-scoring fund belongs.
Basket construction also considers exposure, duplication and diversification.
We don't force a selection.
If a fund does not satisfy the defined criteria, it should not be included simply to fill a basket.
TRANSPARENCY
A methodology should be understandable.
We believe investors should be able to understand the broad principles behind how funds are evaluated and how baskets are constructed.
Our methodology is designed to provide a structured framework for research and review. It is not a guarantee of future performance, and the selection of a fund does not imply that it will outperform another fund or its benchmark.
INVEST WITH CLARITY
Know the process. Understand the basket. Invest with purpose.
Explore MFnxt goal-based index fund baskets and understand how they are designed.
Explore MFnxt Baskets