Medalist Rating (Process)

The Process Pillar covers a fund’s strategy and whether or not management has a competitive advantage enabling it to execute its process well and consistently over time.

Morningstar analysts seek to understand the context in which managers think about risk and how this is expressed when constructing a portfolio. Our analysts make extensive use of Morningstar’s global database and holdings-based analytical capabilities to evaluate that portfolio. They look for strategies with a process distinctive enough to generate standout results in the future. More specifically, analysts seek to understand:

• The investment philosophy that underpins the strategy.
• The key “edge” of the process as executed by the manager.
• Elements that are systematic and repeatable, if any.
• The fit of the process with the resources backing the strategy and with the size of the asset base tied to the strategy (including all vehicles across all domiciles).
• Whether the process has been consistently applied, as demonstrated by the composition of the portfolio over time.
• The risks entailed in the process, from a portfolio-bias point of view and from an ability-to-execute point of view.
• The managers’ approach to risk management.
• Analysts’ expectations for performance in different market environments assuming the process is adhered to.
• The suitability of the strategy for different types of investors given the risks one would expect to see in its portfolio.
• Any historical changes in approach or style, and the reasons for those changes.