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Morningstar to enhance forward-looking fund ratings


Morningstar, a provider of independent investment research, is to enhance two of its forward-looking fund ratings systems, the Morningstar Analyst Rating for funds (Analyst Rating) and the Morningstar Quantitative Rating for funds (Quantitative Rating). 

The enhanced ratings, which are based on an updated assessment framework, will begin to take effect on 31 October, 2019.

The Analyst Rating is Morningstar’s forward-looking, analyst-driven ratings system that takes the form of Gold, Silver, Bronze, Neutral, and Negative. While the overall ratings scale and where to access them remains unchanged, Morningstar will change the underlying methodology analysts follow, setting a higher bar for funds to earn a Gold, Silver, or Bronze rating and also doubling down on fees. The Analyst Ratings will also be tailored to individual fund share classes, taking fee differences into account. Morningstar will make accompanying updates to the Quantitative Rating, a companion forward-looking system that uses machine-learning techniques to assign ratings to funds not covered by a Morningstar analyst. Those updates will ensure the Quantitative Rating continues to strongly align with the Analyst Rating.

“We’ve been encouraged by the way investors have incorporated the Analyst Ratings and Quantitative Ratings into the research they conduct. We’re building on that acceptance and making the ratings more effective and useful to investors,” says Jeffrey Ptak, Morningstar’s head of global manager research. “Additionally, the enhanced framework sets a higher bar for strategies to earn a Gold, Silver, or Bronze rating, and we are placing a greater emphasis on the importance of fees.”

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