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Morningstar Unveils Medal Count for 106 Funds

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Morningstar has unveiled a medal count for the 106 funds covered under its new Morningstar Analyst Ratings, with five funds garnering Gold; 22 earning Silver, and 39 netting Bronze. Rounding out the rankings, 38 funds receiving Neutral ratings and two received negative.

The research firm launched its new analyst ratings last fall. These ratings are qualitative and separate from the Morningstar Rating for Funds (the "Star Rating"). The firm says they are based on Morningstar's conviction in a fund's ability to outperform its peer group or relevant benchmark on a risk-adjusted basis. The rating is built around five pillars: People, Parent, Process, Performance, and Fees. (For closed-end funds, the reports also discuss some CEF-specific issues such as discount and premium, distribution, board of directors, and leverage.)


Unlike the Star Rating, which reportedly relies solely on historical risk-adjusted performance against a peer group, the analyst ratings are qualitative and forward-looking. Historical performance plays a minimal role in the rating, with the focus on the fund's managers, the investment process, and the parent firm.

The five Gold funds reportedly fall into categories all over the map. They Aberdeen Asia-Pacific Income (FAX), Alliance Bernstein Income (ACG), CBRE Clarion Global Real Estate Income (IGR), Gabelli Equity (GAB), and Royce Value Trust (RVT).

For a fund to earn a Gold rating, Morningstar says it must have a strong parent (one that is shareholder-friendly and transparent and has a long and stable history), a cohesive management team with extensive experience investing in the asset class, impressive risk-adjusted historical performance, relatively low fees, and a well-articulated and well-executed investment process.

Morningstar plans to have about 150 funds covered by these analyst ratings by the end of the year.

Tommy Fernandez writes for Money Management Executive.

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