China’s first and only forward-looking and analyst-driven fund rating launched by a wholly foreign-owned independent research provider.
HONG KONG/SHENZHEN, 5th Aug 2020 — Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced the launch of Morningstar Analyst RatingTM for approximately 80 China-domiciled and China Securities Regulatory Commission-approved open-ended funds.
The Morningstar Analyst RatingTM for funds in China is five-tiered with three positive levels—Gold, Silver, and Bronze—in addition to Neutral and Negative ratings. Analysts arrive at a rating through an evaluation of five key pillars they believe are crucial to predicting the future success of a fund, considering both numeric as well as qualitative factors: People, Process, Parent, Performance, and Price.
Morningstar reserves the top three tiers, expressed as medals, for funds its analyst team thinks have sustainable advantages that position them well versus peers and/or a relevant benchmark on a risk-adjusted basis over a full market cycle of at least five years. The Analyst Ratings are not designed to be a market call on an asset class or a prediction of short-term performance and cannot assess whether a fund is the right fit for an investor’s particular portfolio or risk tolerance.
“Morningstar has been producing independent research on funds since the late 1980s. The Morningstar Analyst Rating marks an important step in the evolution of our manager research, which has been applied to funds globally,” said Xiaohua Xia, Managing Director for Morningstar in China. “The launch of Morningstar Analyst Rating in China represents our ongoing commitment to empower investors with an essential toolkit to assess funds, help them make better investment decisions and reach their financial goals.”
“The Morningstar Analyst Rating showcases our analysts’ opinions of the strengths and weaknesses of the funds we cover, and helps investors identify funds our analysts think highly of and those we don’t,” remarked Rachel Wang, Morningstar’s Director of Manager Research, China.
The Morningstar Analyst Rating supplements the Morningstar RatingTM for funds, commonly known as the “star rating”. The Morningstar Analyst Rating provides a distillation of manager research analysts’ forward-looking views about an investment strategy, while the later assigns one to five stars based on a fund’s past risk-adjusted returns versus category peers.
The new Morningstar Analyst Rating scale is as follows:
- Positive Ratings:
- Gold: Best-of-breed fund that distinguishes itself across the five pillars and has garnered the analysts’ highest level of conviction;
- Silver: Fund with notable advantages across several, but perhaps not all, of the five pillars—strengths that give the analysts a high level of conviction;
- Bronze: Fund with advantages that outweigh any disadvantages across the five pillars, and sufficient level of analyst conviction to warrant a positive rating;
- Neutral: Fund that isn’t likely to deliver standout returns, but also isn’t likely to significantly underperform; and
- Negative: Fund that has at least one flaw likely to significantly hamper future performance and is considered an inferior offering to its peers.
Morningstar is committed to expanding our analyst coverage for funds in China in order to empower investors to better assess funds using Morningstar Analyst Rating. In determining coverage, analysts evaluate a fund’s investment merit and take into consideration investor demand across the main asset classes that serve as building blocks for portfolio construction. At the first stage, our analysts would assign the Analyst Rating to funds that offer the highest investment merits and garnered the most investor interest. The analyst team will also devote a portion of its coverage universe to smaller funds with distinguishing characteristics. Initially, there will be more positively rated funds because the analyst team is prioritizing funds with the most investment merit and investor interest, which tends to skew toward higher-quality funds. The ratings distribution will even out over time as Morningstar’s analysts ramp up their coverage.
The new Morningstar Analyst Rating for funds in China, along with analysis of the five pillars, is available to Morningstar’s institutional clients through our flagship software, Morningstar DirectTM, effective 29 July 2020.
The full methodology of Morningstar Analyst Rating is available here.
About Morningstar, Inc. and Morningstar (Shenzhen) Ltd
Morningstar (Shenzhen) Ltd. is a subsidiary of Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $205 billion in assets under advisement and management as of 30 June 2020. The Company has operations in 27 countries. For more information, visit www.morningstar.com/company.
Morningstar (Shenzhen) Ltd is permitted to provide Morningstar Analyst Ratings for institutional investors’ internal use only.
Morningstar’s Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Analyst Ratings are subjective in nature and should not be used as the sole basis for investment decisions. Analyst Ratings are based on Morningstar’s Manager Research Group’s current expectations about future events and therefore involve unknown risks and uncertainties that may cause such expectations not to occur or to differ significantly from what was expected. Analyst Ratings are not guarantees nor should they be viewed as an assessment of a fund’s or a fund’s or separately managed account’s underlying securities’ creditworthiness. This press release is for informational purposes only; references to securities or a separately managed account investment strategy in this press release should not be considered an offer or solicitation to buy or sell the securities or to invest in accordance with that strategy.
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