Morningstar streamlines forward-looking rating system

The newly-formed Medalist Rating aims to identify future outperformance

Morningstar has streamlined its forward-looking investment ratings system, uniting the Analyst and Quantitative ratings into the newly-formed Morningstar Medalist Rating.

Morningstar announced its intention to merge the ratings systems at the end of August last year, with the changes coming into effect today (2 May).

The Medalist rating seeks to identify funds that have the best chance of outperformance in the future, according to Morningstar, and it combines the qualitative and quantitative approaches of its predecessors, while retaining the familiar rating scale of Gold, Silver, Bronze, Neutral and Negative.

The firm said: “The process of how we assign the Morningstar Analyst Rating or Morningstar Quantitative Rating remains the same. With the launch of the Medalist Rating, the presentation of the ratings, and united name, will now more clearly display the mix of analyst and algorithm input to each investment’s rating.”

However, the superscript “Q” designation, which formerly applied to the quantitatively assessed investments, will no longer feature.

Only open-ended funds, ETFs, SMAs, or model portfolios are eligible to receive the rating, the investment must fall into a Morningstar Category that is eligible to receive forward-looking ratings.

The backward-looking Morningstar Rating, which is based on funds’ trailing risk-adjusted returns versus their peers, remains unchanged.

Speaking at the Morningstar Investment Conference, CEO Kunal Kapoor said the firm believes humans and machines can work together to solve the problem of ever-expanding investment choices.

The firm added: “As managed investment products rapidly grow, the single rating system will allow Morningstar to leverage the best of our qualitative and quantitative insights to provide timely and efficacious ratings for investors.”

See also: Sustainable funds see further outflows in Q1

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