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Looking Forward to Changes to Our Forward-Looking Ratings

We’re enhancing the Morningstar Analyst Rating and Morningstar Quantitative Rating to make them even more useful to investors

Jeffrey Ptak, CFA 16.07.2019

Later this year, we’ll be enhancing our forward-looking fund rating systems, the Morningstar Analyst Rating for funds and the Morningstar Quantitative Rating for funds. We’ll be changing the way we assign these ratings to managed investments like mutual funds. In this piece, I’ll walk through what’s changing and the benefits we think these changes will confer. (Morningstar Direct and Office clients can find a more detailed explanation of the new process here.)

Key Takeaways
• We’re enhancing the Analyst Rating and Quantitative Rating to make them even more useful to investors.
• We’re making three key changes to the Analyst Rating, putting even more weight on fees, setting a higher bar for active funds, and focusing our assessment on people, process, and parent.
• We’re leaving the ratings scale unchanged--Gold, Silver, Bronze, Neutral, and Negative--but do expect ratings changes to occur, with downgrades likely to outnumber upgrades.
• We’re also making companion changes to the Quantitative Rating, which is designed to algorithmically mimic the way analysts assign ratings to funds they cover.
• We’ll update an initial batch of Analyst Ratings under the new framework on Oct. 31, 2019, with the remainder of the coverage universe to be updated over the subsequent 12 months; we’ll update the Quantitative Ratings en masse in November 2019.

Background
The Analyst Rating is a forward-looking, qualitative rating that our manager research analysts assign to managed investments like mutual funds. Launched in 2011, the Analyst Rating denotes our analysts’ conviction in a fund’s ability to outperform based on fundamental research they conduct.

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About Author

Jeffrey Ptak, CFA

Jeffrey Ptak, CFA  Head of Manager Research

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