Morningstar Australasia will align its rating system for funds in Australia and New Zealand with a new global ratings scale used by its American parent to rank funds worldwide.
The independent investment research provider plans to start rolling out the new ratings and research reports in Australia and New Zealand in the fourth quarter.
“The global reach of our fund manager research capability is one of our core strengths, and something our clients value highly,” Morningstar Australasia chief executive Anthony Serhan said.
Chicago-based Morningstar has more than 90 analysts of funds and exchange-traded funds (ETF) worldwide covering about US$9 trillion in assets globally. The company provides data on about 140,000 mutual fund share classes.
“The move to a common rating system will further emphasise the global depth of our fund research, and make it easier for the growing number of our clients who use our research across multiple markets,” Serhan said.
“Importantly, the new rating scale will not change the underlying approach we already use nor will it have a dramatic impact on the relative rankings of the funds we cover.”
Morningstar does not charge fund managers to be rated but bases its decision on investor interest, asset size and other factors.
The new system is made up of five ratings. They are AAA, AA, A, neutral and negative. Analysts arrive at a rating through an evaluation of five pillars Morningstar believes are key to predicting the future success of a fund: people, process, parent, performance and price.
“The rating is designed to supplement the fund due diligence process for investors and advisers and identify funds worth investing in over the long term,” Morningstar’s fund research president Don Phillips said.
“It is not designed to be a short-term market call on an asset class.”
Morningstar will not change its quantitative star-rating systen, which is a backward-looking measure that rates historical performance based on risk- and cost-adjusted returns without any input from Morningstar’s analysts.
