Morningstar launches new rating scheme for China funds
Funds to be assessed according to five pillars deemed crucial to predicting their success
5 Aug 2020 | The Asset

Investment research provider Morningstar has launched an analyst-driven rating system for approximately 80 open-ended funds domiciled in China and approved by the China Securities Regulatory Commission.

The Morningstar Analyst Rating for China funds consists of five ratings, namely gold, silver, bronze, neutral and negative. Analysts arrive at a rating through an evaluation of five key pillars they believe are crucial to predicting the success of a fund: people, process, parent, performance, and price.

The top three tiers of gold, silver and bronze, expressed as medals, are reserved 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 ratings are not designed to be a market call on an asset class or a prediction of short-term performance, nor are they meant to assess whether a fund is the right fit for an investor’s particular portfolio or risk tolerance, the company stresses.

“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,” China managing director Xiaohua Xia says in a statement.

“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 supplements the Morningstar Rating 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 latter assigns one to five stars based on a fund’s past risk-adjusted returns versus category peers, the company says.

The Morningstar Analyst Rating  is available to the company’s institutional clients through its flagship software, Morningstar Direct, from July 29.

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