CHICAGO, June 21, 2012—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today introduced the Morningstar Analyst Rating™ and Global Fund Reports for approximately 40 alternative U.S. mutual funds, representing about 75% of the alternative fund universe by assets. Over the next year, the company plans to increase its alternatives coverage to approximately 100 funds.
Initially, Morningstar analysts assigned a Morningstar Analyst Rating of Gold to one alternative mutual fund, a Silver rating to nine funds, a Bronze rating to seven funds, a Neutral rating to 17 funds, and a Negative rating to six funds.
“The strategies employed in alternative funds are often new and sometimes complex. Our goal with the Analyst Ratings and Global Fund Reports for these alternative investments is to help institutions and financial advisors research and compare funds as they continue to seek diversification through alternative investments,” Nadia Papagiannis, director of Morningstar’s alternative fund research and editor of Alternative Investments Observer, said. “Our recent survey about the perception and usage of alternative investments found that financial advisors and institutions continue to value alternatives. While inflows to equity-based alternative mutual funds have slowed, investors continue to flock to non-equity-based funds, such as managed futures mutual funds.”
The five-tiered Morningstar Analyst Rating scale has three positive levels—Gold, Silver, and Bronze—in addition to Neutral and Negative ratings. Analysts arrive at a rating through an evaluation of five key pillars they believe are crucial to predicting the future success of a fund, considering both numeric as well as qualitative factors: People, Process, Parent, Performance, and Price. Morningstar analysts score these five pillars as Positive, Neutral, or Negative, which are then combined for the overall rating.
The Morningstar Analyst Rating scale is as follows:
• Positive Ratings:
o Gold: Best-of-breed fund that distinguishes itself across the five pillars and has garnered the analysts’ highest level of conviction;
o Silver: Fund with notable advantages across several, but perhaps not all, of the five pillars—strengths that give the analysts a high level of conviction;
o Bronze: Fund with advantages that outweigh any disadvantages across the five pillars, and sufficient level of analyst conviction to warrant a positive rating;
• Neutral: Fund that isn’t likely to deliver standout returns, but also isn’t likely to significantly underperform; and
• Negative: Fund that has at least one flaw likely to significantly hamper future performance, and is considered an inferior offering to its peers.
The Morningstar Analyst Rating for alternative mutual funds, along with analysis of the five key pillars, is now available on Morningstar’s investment research website for individual investors, Morningstar.com®, and under the Alternatives tab on MorningstarAdvisor.com, the company’s website for financial advisors with practice management information, investment trends, and industry insights. The new Analyst Ratings, supporting analysis, and Global Fund Reports are also available in Morningstar DirectSM, the company’s web-based global investment analysis platform for institutional investors; and in Morningstar OfficeSM, a global practice and portfolio management solution for advisors.
The Morningstar Analyst Rating for funds complements the Morningstar Rating™ for funds, commonly known as the “star rating,” which assigns one to five stars based on a fund’s past risk- and load-adjusted returns versus category peers. Morningstar launched the Analyst Rating for funds in November 2011 for open-end mutual funds and now covers more than 800 U.S. funds.
Morningstar’s fund analysts cover more than 5,000 funds globally, and the company provides data on more than 124,000 mutual fund share classes and 9,400 ETFs. For a list of the newly rated alternative mutual funds, please visit http://global.morningstar.com/AnalystRatingsAltFunds.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 380,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has more than $190 billion in assets under advisement or management as of March 31, 2012. The company has operations in 27 countries.
Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar analysts’ current expectations about future events and therefore involve unknown risks and uncertainties that may cause Morningstar’s expectations not to occur or to differ significantly from what was expected. Morningstar does not represent its Analyst Ratings to be guarantees nor should they be viewed as an assessment of a fund’s or the fund’s underlying securities’ creditworthiness.
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