What it does and does not do.
From a letter to Mutual Fund Observer--
"Osterweis (OSTFX) is a mid-cap blend fund, according to M*. But don't say that to John Osterweis. Even looking at the style map, you can see that the fund covers all of the style boxes, and it has about 20% in foreign stocks, with 8% in emerging countries. John would tell you that he has never managed the fund to a style box. In truth he is style box agnostic. He is looking for great companies to buy at a discount. Yet M* compares the fund with others that are VERY different."
What we have here is a failure to communicate.
I've written about this subject previously, but not very clearly. This effort, I hope, will be more direct.
1) "Osterweis (OSTFX) is a mid-cap blend fund, according to M*."
Immediately comes the critical point.
Morningstar does not say what a fund is. Morningstar assigns funds to categories. The two activities are quite different.
Consider Vanguard Managed Payout Growth & Distribution VPGDX. The fund invests a globally diversified portfolio and promises to distribute 4% of its assets per year. That fund could be placed into the world-allocation Morningstar Category, which consists of funds with similar asset-allocation schemes but no income targets, or into the retirement-income category, which consists of funds that invest less in equities but that are similarly focused on income.
Neither fit is good. The fund is not a world-allocation fund, nor is it a conventional retirement-income fund. It is something different, one of a very small cadre of funds that promises a managed payout--a cadre at this stage too small to warrant its own category. Whatever choice Morningstar makes (retirement income, as it turned out), it is not because Morningstar is confused and believes the fund to be something other than what it is. It is because the fund must go somewhere.