U.S. provider of investment reserch Morningstar plans to apply the forward-looking Morningstar Analyst Rating to exchange-traded funds globally.
This will allow investors to more easily compare investments across fund types. With rollout anticipated later this year, Morningstar will initially assign Morningstar Analyst Ratings to approximately 300 exchange-traded funds (ETFs).
The Morningstar Analyst Rating is a qualitative rating that signals Morningstar analysts’ conviction in a fund’s ability to outperform relevant peers, including both mutual funds and ETFs, on a risk-adjusted basis over a full market cycle.
Five-Tiered Scale
The Morningstar Analyst Rating follows a five-tiered scale: Gold, Silver, Bronze, Neutral, and Negative, with analysts arriving at a rating through an assessment of five key pillars: process, performance, people, parent, and price.
In addition, Morningstar will remove the load, or commission/sales charge, adjustment from the Morningstar Rating, commonly known as the star rating, calculation globally. The updated Morningstar Rating methodology for funds is available here.
Removing the Load
«We’ve found that fewer investors are paying commissions or sales charges, which is why we’re removing the load adjustment from the Morningstar Rating calculation. When we established the Morningstar Rating methodology, these charges were much more common and we saw a need to highlight the cost for investors,» Hortense Bioy, Morningstar’s Director of European Passive Funds Research, said.
Morningstar has approximately 115 manager research analysts worldwide who cover approximately 4,000 funds. The company provides data on about 205,600 open-end mutual funds, 10,300 closed-end funds, and 13,900 exchange-traded product listings.
