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Fund Family Score

A proprietary Morningstar data point, fund family scores are designed to give investors a measure of how well a firm has done as a whole in one of four asset classes.

The Fund Family Score is an asset-weighted average of all of a fund company's Morningstar Ratings, also known as star ratings, within an asset class. At Morningstar, we aggregate the star ratings earned by each of the family's funds within domestic stocks, foreign stocks, municipal bonds, and taxable bonds. We use each fund's asset level from three years ago in order to reflect investors' actual recent experience at the firm.

The Fund Family Score can help you gauge a firm's overall ability within a specific asset class (domestic stock, international stock, municipal bond, or taxable bond). The scores range from 1.0 to 5.0.

A score below 2.5 is an indication that the firm has met with little success in that asset class. A score between 2.5 and 3.5 indicates the firm is about average.

A score above 3.5 indicates the firm has a fair amount of prowess. The more funds a firm manages in an asset class, the stronger a signal the Fund Family Score is about the firm's performance.

The score is intended as a check on the quality of a firm's management in each asset class. A score of 2 or lower indicates that a firm has performed poorly in that asset class. This may signal the firm has structural problems such as weak research or high costs. Thus, a low fund family score indicates you should be wary of a fund even if the fund itself has a high rating.

The score is not intended to serve as a ranking among fund families. The law of averages dictates that a firm with a lot of funds in an asset class is more likely to have a fund family score near the average (3). Conversely, a smaller firm is more likely to have a score near the low or high end because only a few funds are being measured. If you want to compare fund family scores, be sure to do it using firms that offer a similar number of funds.

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