Research ratings are not the holy grail of advice on funds and managers, according to Standard and Poor's (S&P).

"Users of the rating need to understand that it is not an all-encompassing investment recommendation, nor does it predict the performance of specific market sectors," S&P fund analyst Greg Barr said.

Advisers must also recognise the importance of their role in allocating products to investors.

"S&P considers that the adviser has a critical role to play in determining the suitability of the product for a particular investor," Barr said. 

The comments come as S&P changes its ratings approach for alternative structures, which now includes an opinion on the effectiveness of the product structure as well as a view on the management of the underlying exposures the product is replicating or delivering.

"It's important that advisers understand structured products because they are so highly customised, but this process also applies broadly to other ratings," S&P fund services director Mark Hoven said.

The new approach encompasses a five-level ratings scale, from weak to very strong, as an overall assessment of the product.

Previously S&P had a simple binary rating scale for products with alternative structures, rating products either investment grade or non-investment grade.

"We believe our new approach will give advisers and investors greater clarity in terms of understanding S&P's view on the various strengths and weaknesses of each product," Barr said. 

"Looking forward, we expect further evolution in how products are structured and we expect to see a greater variety of underlying exposures, including index-based, and active and passive managed investments."

Products with alternative structures include both listed and unlisted vehicles, including structured products, managed accounts, exchange-traded funds, and listed investment companies, giving investors exposure to equities, fixed income, commodities, property, currencies and hedge funds.