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Morningstar Will Enhance Medalist Rating Methodology for Improved Investment Insights
CHICAGO--(BUSINESS WIRE)-- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today announced its plans to enhance the
About this update from Morningstar, Inc.
[{"type":"text","content":" CHICAGO--(BUSINESS WIRE)--\nMorningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment insights, today announced its plans to enhance the methodology of the Morningstar Medalist Rating™, its comprehensive forward-looking rating for managed investments.\n\nThe Morningstar Medalist Rating is a five-tier system designed to evaluate an investment strategy's potential to outperform a relevant index or peer group over the long term. Ratings are assigned on a scale from Gold to Negative based on an evaluation of how much value a managed investment can add compared to its assigned benchmark after fees and three pillars—People, Process, and Parent—that determine Morningstar’s conviction in a particular investment strategy.\n\nThe enhancement, which will begin to take effect on Oct. 29, 2024, refines Morningstar's framework for forecasting future returns but maintains the same process for assigning ratings. Using historical data, the updated framework introduces a more precise assessment of how much value a managed investment can add before fees compared to its assigned benchmark. This is called the Alpha Potential Estimate, and it is an important input into the Medalist Rating framework. Morningstar expects the updated methodology to change the ratings for about 20% of Medalist-rated investment vehicles, most of which will be downgrades that result from a reduced Alpha Potential Estimate.\n\n“There are a wide range of investment products available today, and Morningstar's ratings serve to guide investors toward informed decisions,\" said Jeff Ptak, chief ratings officer at Morningstar. \"Our Medalist Rating has done a good job of sorting funds based on future performance, and this methodology enhancement is an opportunity to build on this strength to further empower investors.”\n\nMorningstar is also refining the algorithm that evaluates the Process pillar of passively managed equity vehicles that are not covered by an analyst. The updated approach will employ a rules-based system that more closely aligns with how Morningstar’s Manager Research analysts evaluate the Process pillar of the ratings for these types of investments.\n\nFor additional details, an FAQ is available here.\n\nAbout Morningstar, Inc.\n\nMorningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia...