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Alexa Auerbachalexa.auerbach@morningstar.com
Morningstar Launches Comprehensive Family of Asset Allocation Indexes Based on Ibbotson Methodology
CHICAGO, Feb. 18, 2009—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today launched a comprehensive family of asset allocation indexes, designed to benchmark target-date and target-risk investment products—the Morningstar Lifetime Allocation Index series and the Morningstar Target Risk Index series.

The Morningstar Lifetime Allocation Index series consists of 13 target-date indexes each of which is available in three risk profiles—aggressive, moderate, and conservative. The index asset allocations adjust over time—even beyond the stated retirement date—by reducing equity exposure and shifting toward traditional income-producing and inflation-hedging asset classes (e.g., bonds and Treasury inflation-protected securities).

The Morningstar Target Risk Index series consists of five asset allocation indexes that span the risk spectrum from conservative to aggressive. All of the indexes are based on well-established asset allocation methodology from Ibbotson Associates, a Morningstar company and a leader in the field of asset allocation theory.

Morningstar relies on its comprehensive family of proprietary indexes that span a global set of equity, fixed income, and commodity asset classes to build the asset allocation indexes. The family of asset allocation indexes can serve as benchmarks to help with target-date, target-risk, and retirement-income product selection and evaluation or can be licensed to institutions for the creation of investment vehicles like mutual funds, exchange-traded funds (ETFs), or commingled trusts.

“There is significant variation in asset allocation from one fund family to another for target-date and target-risk funds with the same stated goal. One family’s 2020 target retirement date fund, for example, can be much more aggressive than another’s,” said Sanjay Arya, director of Morningstar Indexes. “This diversity is positive for investors, because they have different tolerance and capacity for risk. However, this deviation among fund families makes benchmarking these funds more difficult. That’s why we created a complete family of asset allocation indexes with varying risk levels to help investors and fiduciaries evaluate these funds to find the best fit.”

All of the asset allocation indexes are designed with a focus on transparency and “investability.” The company uses a transparent, rules-based methodology to construct its underlying indexes using stocks and bonds that are liquid and readily available to investors, which makes these indexes easily replicated.

“An investor’s problem isn’t solved the day his target fund hits its maturity date. Investors need investment solutions that continue to evolve as their risk capacities and income needs change throughout retirement. It’s also important to recognize that no single glide path, or progression of the portfolio mix, is right for everyone. In addition to risk capacity, an investor’s risk preference should impact the portfolio allocation,“ said Thomas Idzorek, research director and chief investment officer for Ibbotson Associates. ”Our conservative-to-aggressive glide paths rely on the latest academic research on Modern Portfolio Theory, the role of human capital, the application of liability-driven investing techniques for retirees, advanced optimization, and alternative asset class research.”

Morningstar created its first family of indexes in 2002 and now offers domestic and international equity and fixed income indexes as well as commodity and asset allocation indexes. Currently, 14 ETFs track Morningstar Indexes. For more information about the Morningstar Lifetime Allocation and Target-Risk Indexes and Ibbotson’s asset allocation methodology, visit global.morningstar.com/US/AAIndexes.

About Morningstar, Inc. and Ibbotson Associates
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 290,000 investment offerings, including stocks, mutual funds, and similar vehicles. The company has operations in 19 countries and minority ownership positions in companies based in three other countries.

Ibbotson Associates is a leading independent asset allocation provider offering investment advisory services, retirement advice programs, and customized research. Ibbotson applies academic research to create real-world solutions for financial institutions. Founded in 1977, Ibbotson is a registered investment advisor and wholly owned subsidiary of Morningstar, Inc.

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©2009 Morningstar Inc. All rights reserved.
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