Morningstar Australasia has migrated its recommendation qualitative rating scale for Australian and New Zealand managed funds to the new global Morningstar analyst rating system.
"Morningstar has been providing analyst research on funds since the late 1980s, but our new rating system represents the first time that we've offered a global qualitative rating for funds," Morningstar Australasia chief executive Anthony Serhan said.
"Investors and advisers in Australia and New Zealand will benefit from the extensive work we've undertaken globally to identify and codify the strengths of our various fund evaluation methods."
The new system operates on a five-tiered analyst rating scale where analysts arrive at a rating through an evaluation based on people, process, parent, performance, and price.
Morningstar analysts then score the five pillars as positive, neutral, or negative, which are combined for the overall rating.
"Morningstar reserves the top three tiers, expressed as medals, for funds its analyst team thinks have sustainable advantages that position them well, relative to peers and/or a relevant benchmark on a risk-adjusted basis over a full market cycle of at least five years," the company said.
Under the system, gold represents a best-of-breed fund; silver represents a fund with notable advantages across the five pillars; whereas bronze denotes a fund with advantages that outweigh any disadvantages across the pillars.
A neutral rating is for a fund that isn't likely to deliver standout returns, but also isn't likely to significantly underperform. A negative rating is for a fund that has at least one flaw likely to significantly hamper future performance and is considered an inferior offering to its peers.
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