morningstar rdr-readies its ratings

Morningstar has revised the methodology for its closed-end fund ratings in the UK, in a bid to enable easier comparison with Oeics ahead of RDR.

morningstar rdr-readies its ratings


The new methodology was introduced today and allows investors to "more readily compare risk-adjusted performance" between all Morningstar-rated funds, it said.

Jackie Beard, director of closed-end fund research for Morningstar UK, said: "We wanted to make the change ahead of the industry’s shift to a fee-based advice model when a greater interest in investment trusts is expected to emerge."

Ratings for closed-end funds are now calculated using the fund’s NAV, which Morningstar said it believes to be a superior measure of its risk-adjusted performance.

Prior to today, the ratings for closed-end funds were calculated using the fund’s market closing price.

In addition, Morningstar will now calculate quantitative ratings for all London-listed closed-end funds using its own category system rather than the AIC’s sectors.

It said this would help provide analysis of a fund against its "true peers" and would be particularly important for funds with a specialist remit, which do not have a vast peer group to measure against.

Beard added: "The changes to our closed-end fund rating methodology are intended to assist advisers in their whole-of-market proposition.

"Risk-adjusted performance comparisons – on a vehicle-agnostic basis – are now possible, which means investors and advisers can now more readily compare the Morningstar ratings of investment trusts with those of similar open-end and ETFs."

The new methodology calculates the rating on the fourth business day of each month and does not adjust for transaction costs.


Latest Stories