Morningstar ratings overhauled
THE Morningstar research house has dropped qualitative assessments from its famed star rating of fund managers.
The group, whose star ratings had been made up equally of a quantitative measure of investment performance and a qualitative opinion of a manager’s ability, announced last week that the ranking system would now judge managers purely on investment returns.
Morningstar head of consulting Anthony Serhan said the change would bring the star rating system in Australia into line with the research house’s approach in other countries.
The group, which has had to endure speculation in the past that it would pull out of qualitative research in Australia entirely, will continue to incorporate qualitative findings into its reports through a separate ratings system, the Morningstar Recommendation.
The Morningstar Recommendation, which has formed part of the research house’s existing reports since last September, will rank managers as either ‘Highly Recommended’, ‘Recommended’, ‘Investment Grade’, ‘Hold’, or ‘Avoid’.
Serhan was adamant the changes were not a precursor to Morningstar dropping qualitative assessments altogether, saying such a suggestion was a “a misinformed opinion”.
“We wanted greater transparency in terms of what we did in the ratings process and advisers told us they wanted greater transparency too,” he said.
In another new initiative, the research house will also start categorising managers based on their style and the sector — large or mid/small cap — they specialise in.
Chief executive Scott Cooley said the move would help advisers make “apples-to-apples” comparisons.
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