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Will Your Funds Pass Our Tougher Stewardship Test?

We're raising the bar on governance.

It's getting tougher to ace Morningstar's Stewardship Grade for mutual funds.

Morningstar announced today that it is making five changes to the methodology behind its Stewardship Grades. This updated methodology is designed to better recognize the industry's best caretakers of capital and make the Stewardship Grades easier for investors to use.

The basic structure of the grades remains intact. The grade is still based on our fund analysts' evaluation of five main components: corporate culture, fund board independence, fund manager incentives, fees, and regulatory history. Under the improved methodology, however, we will no longer equal-weight all five sections when determining a fund's final Stewardship Grade because we think some areas have greater influence over a firm's governance practices than others. We're also altering some of the criteria our analysts use to evaluate three of the components. Finally, we're also changing the way we describe the funds' scores in each of the five components so they're more intuitive.

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