Morningstar is introducing three new categories.
Morningstar is rolling out three new categories.
When we decide whether a category should be created, we look for three things. First, we look for performance that's different from the existing categories. Second, we look for a measurable difference in portfolios. Third, we look for a critical mass of at least 20 funds--you'd be amazed how many fund types go from trendy to dumpster in a few years.
For a really deep dive on our categories, check out our methodology document on the subject.
With that in mind, we have created three categories that meet those tests.
Investors continue to show more interest in playing the biggest emerging markets. There are 25 open-end and 17 ETFs in this new category. We define it as funds with at least 75% of their equity assets in China, Taiwan, and Hong Kong. As the group has grown, a number of approaches to regional exposure have been applied, and we captured most by including any of the three markets that are seen as plays on China.
The category boasts two funds with more than $1 billion: Matthews China
We're carving our long-short group into two by pulling out the market neutral funds from those that can have more varied long-short exposure. Market neutral portfolios seek income while maintaining low correlation to fluctuations in market conditions. Market neutral portfolios typically have net equity exposure between negative 20% and 20% and a beta between negative 0.3 and 0.3. All told there are 29 open-end market neutral funds and no ETFs.
The group has five funds with more than $1 billion: Arbitrage