The new ratings and accompanying analyst research reports complement the quantitative Morningstar Rating for funds (often referred to as its “star rating”) to help provide investors and their advisers with a tool to compare, screen, and research funds. Morningstar aims to rate and report on 3,000 funds in Europe and Asia, which would increase the total number of funds worldwide for which the company provides written analyses to more than 5,000.
According to a press release, the new ratings and research offer “forward-looking insight and assumptions” into how a fund might behave under different market conditions and are based upon fundamental criteria such as expenses, manager experience, and investment approach. Morningstar does not charge fund groups to be rated, nor can they commission research – the decision to report on a fund is driven by investor interest and analyst discretion, according to Morningstar.
The new Morningstar Qualitative Rating for funds will be issued as one of five ratings—Elite, Superior, Standard, Inferior, or Impaired—based on the analyst’s conviction in the fund’s ability to outperform its peer group over the long term, according to Morningstar. Along with the qualitative rating, Morningstar will issue a detailed Morningstar Fund Research Report, which contains:
- the rationale behind the qualitative rating,
- the analysts’ thoughts on the fund manager and team,
- an overview of the fund’s investment process and portfolio positioning,
- an examination of the fund company and incentive structure, and
- an evaluation of the fund’s performance and expense structure.
These qualities are examined within the context of Morningstar’s “Five Pillars” of fund research—People, Parent, Process, Performance, and Price, and each, according to the press release, is supported by detailed analytics, operational data, and performance illustrations.
Morningstar clients will be able to access the new ratings and research through Morningstar Adviser Workstation; Morningstar Direct, its flagship institutional platform; Morningstar Workstation, and across its various retail Web sites.
More information about the Morningstar Qualitative Ratings and Research is available at http://global.morningstar.com/uk/qualrating .