Morningstar Qualitative Rating™

Morningstar analysts assign a Morningstar Qualitative Rating™ to funds using a five-point scale ranging from Elite to Impaired.

Morningstar 29.07.2009
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Analysts rate funds on a relative basis, against a pan-European and Asian universe of funds in a similar peer group. The ratings scale is unique from other firms because it includes negative ratings which allow analysts to assess and rate poor funds, as well as good funds. Investors will be able to screen and filter their fund choices using the qualitative ratings.

The ratings are as follows:

These funds represent Morningstar analysts’ highest conviction picks. Morningstar awards the rating to funds that it believes are capable of outperforming their peers over the long term. To earn this rating, a fund must be sig

nificantly better than its peers in most key respects.

Funds in this category are those Morningstar analysts believe are above average and capable of producing peer-beating returns. While these are worthy funds, analysts don’t see them as the very best.

These funds are not standouts, but nor are they deeply flawed. Morningstar analysts do not have a high degree of conviction that they can outperform.

These funds are thought to be deficient relative to their peers in key respects. Morningstar analysts believe these funds are likely to underperform their peers through time.

Morningstar analysts believe that a severe structural defect at the parent organisation or the fund make these offerings extremely poor investments.

Under Review:
Morningstar analysts will also place a fund “under review” when the fund has experienced a fundamental change requiring a reassessment. This is not a rating.

The ratings reflect Morningstar analysts’ conviction in the fund’s ability to outperform over the long term. The rating is not an individualised recommendation; the best emerging markets equity fund, for instance, might not fit with a particular investor’s risk appetite, time horizon, and other portfolio holdings. While the rating is a useful short-hand, investors must read the underlying report to gain a full understanding of the fund.

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