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Fund Spy

Screening for Strong Funds That Are Good Stewards

How to use Stewardship Grades during your fund-selection process.

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We're hearing that more and more financial planners are using Morningstar Stewardship Grades for funds to help them decide which offerings might be best for their clients. The Stewardship Grades, which Morningstar launched two years ago, consider dozens of criteria to determine whether individual funds are likely to be quality fiduciaries when it comes to regulatory compliance, board independence, manager compensation, fees, and corporate culture. We weigh all of those factors and ultimately assign letter grades to funds. As is the case in school, A grades are best. (For more details on the methodology we use when assigning Stewardship Grades, click here.)

As is also the case with the Morningstar Rating (aka "the star rating"), you shouldn't base your fund buy-and-sell decisions solely on the Stewardship Grade. Instead, use the Stewardship Grade as one of a number of factors you consider before investing, including the fund manager's experience, the strategy and how it fits with your goals and risk tolerance, the offering's risk/reward profile, and its fee structure. But we--and presumably the advisors and other investors who consult our Stewardship Grades when making an investment--believe that stewardship is an important aspect of the shareholder experience.

With this in mind, we used Morningstar's  Premium Fund Screener tool to design screens that would pick out some topnotch offerings with strong Stewardship Grades.

Laura Pavlenko Lutton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.