Signature Research & Methodology

The rationale that underpins our calculations and capabilities


Morningstar Sustainable Attributes℠ - FAQ

As the industry has evolved, portfolio managers increasingly include environmental, social, and governance dimensions into their investment processes. Investors now seek tools to more easily identify managed investments committed to employing these different strategies to mitigate sustainability risk or to better align with their goals or values.

Morningstar Research | May, 2019


Morningstar Fund Flow Model Methodology

The Morningstar Quantitative Research team has been researching drivers of fund flows since the 2015 launch of the "What Factors Drive Investment Flows" paper. Subsequently, we conducted a body of work researching fund flows for new funds, how fund flows influence fund closures, and the effects of manager changes on fund flows. In total, the work analyzes fund flows during all phases of a fund's lifecycle: launch, operational, closure, and transitional periods. Morningstar is interested in the full lifecycle of fund flows because they represent the aggregate decisions investors make to their portfolios.

Morningstar Quantitative Research | Sept 10, 2019


Morningstar After-Tax Return Methodology

After-tax returns are measures of fund performance that take into account the taxes a hypothetical investor pays on fund distributions and capital gains. While a fund’s total return reflects the performance of the underlying securities, the after-tax return reflects the net gains or losses that an investor receives after paying taxes.

Morningstar Research | March, 2019


Morningstar Category for Funds Definitions - United States

Morningstar Category for Funds Definitions for funds available for sale in the United States.

Morningstar Methodology | April, 2019


Target-Date Fund Series Reports Methodology

Target-date funds are designed to be a simple, all-in-one solution that is relatively easy for investors to use. However, these simplifying features can make target-date funds tricky to evaluate. Morningstar Target-Date Fund Series Reports ("the Reports") are designed to help individual investors, financial advisors, consultants, plan sponsors, and other interested fiduciaries make informed decisions when selecting a series of target-date funds.

Morningstar Manager Research | June 20, 2019


Morningstar Quantitative Equity & Credit Ratings - Methodology

Morningstar has now developed a new way of combining our quantitative and analyst-driven output while expanding the coverage of our analysis beyond the capabilities of our analyst staff.

Morningstar Quantitative Research | Sept 16, 2019


Morningstar Category Definitions - Europe, Asia and South Africa

The Morningstar Categories for funds in the Europe/Asia/Africa universe were first established in the early years of the UCITS (Undertaking for Collective Investment in Transferable Securities) Directive to help investors make meaningful comparisons between Investment funds. Morningstar regularly reviews the category structure and the funds within each category to ensure that the system meets the needs of investors and keeps pace with market developments.

Morningstar Research | Oct, 2019


Morningstar Category Definitions - Korea

The Morningstar Category classifications were introduced to help investors make meaningful comparisons between mutual funds. Morningstar regularly reviews the category structure and the portfolios within each category to ensure that the system meets the needs of investors.

Morningstar Research | Oct, 2019


Morningstar Category Definitions - Japan

The Morningstar Category classifications were introduced to help investors make meaningful comparisons between mutual funds. Morningstar regularly reviews the category structure and the portfolios within each category to ensure that the system meets the needs of investors.

Morningstar Research | Apr, 2019


Morningstar Sustainability Ratings Methodology Change FAQ

In late 2019, Morningstar enhanced the current Morningstar Sustainability Rating methodology by replacing Sustainalytics' company ESG Rating with its ESG Risk Rating. We also introduced buffers between ratings increments to increase overall stability and establish rules for handling ratings of portfolios with extremely high overall ESG risk.

Morningstar Sustainability Research | Jul 1, 2019


Morningstar Global Equity Classification Structure

Portfolio diversification is generally thought of in terms of market capitalization and investment style, yet sector diversification is equally important. Pursuing a growth investment style via technology stocks leads to substantially different portfolios—and results—than pursuing growth via healthcare stocks.

Morningstar Research | Nov 8, 2019


Morningstar Sustainability Pillar Scores

In 2016, Morningstar released the Morningstar Sustainability Rating to help investors use environmental, social, and governance, or ESG, information to evaluate portfolios. The rating provides a reliable, objective way to evaluate how their portfolios are meeting ESG challenges.

Morningstar Research | Nov 8, 2019


Morningstar Quantitative Risk Ranking Methodology

Global wealth has increased dramatically over the past several decades, both in the aggregate and on a per capita basis. At the same time, capital markets have continued to broaden and deepen around the world, giving more people access to a wider selection of investment products in which to invest that wealth.

Morningstar Quantitative Research Research | Nov 15, 2019


Morningstar Factor Profile Methodology

A sizable literature exists identifying various “factors” that are believed to drive investment risk and return. Morningstar Style Box was an early adopter of factor identification, characterizing fund performance along two dimensions ­ size and value-growth. It has since become an invaluable tool for many investors in understanding fund and stock performance.

Morningstar Quantitative Research Research | Nov 20, 2019


Morningstar Risk Model

Risk is inherent to investing. Developing a prospective view of risk allows investors to make investment decisions tailored to their individual risk preferences and ultimately increase the utility derived from their investment portfolios. A risk model forecasts the distribution of future asset returns. This distribution contains all the information needed to assess the riskiness of a portfolio.

Morningstar Research | Oct 1, 2019


Global Investor Experience 2019

The Global Investor Experience Fees and Expenses study grades are based on responses to six questions in a fixed-response survey completed by in-house, country-expert analysts, plus other inputs determined quantitatively by leveraging Morningstar’s comprehensive and extensive global database of managed products.

Grant Kennaway | Sep 16, 2019


A Framework for Evaluating Model Portfolios

This research paper provides a high-level overview of the model portfolio landscape and outlines our framework for assigning the forward-looking Morningstar Analyst Ratings to target-risk series of separate accounts that are representative of model portfolios.

Jason Kephart | May 06, 2019


Fixed-Income Style Box Methodology

The Morningstar Fixed-Income Style Box helps investors and financial professionals better understand the risks associated with a fund. It combines interest rate and credit risk in an intuitive visual to assist in portfolio construction and monitoring, leading to better investing outcomes.

Morningstar Analysts | Oct. 31, 2016


Morningstar Analyst Ratings for Funds Methodology

The Analyst Rating reflects Morningstar analysts' forward-looking analysis of a fund, expressed on a five-tier scale with three positive ratings of Gold, Silver, and Bronze, a Neutral rating, and a Negative rating.

Morningstar Fund Analysts | Nov 15, 2011


The Morningstar Analyst Rating for Funds: Analyzing the Performance of the Analyst Rating Globally

We analyzed the global performance of the Morningstar Analyst Rating for funds based on its ability to predict funds' future risk-adjusted returns. Taken as a whole, we find that Analyst Ratings effectively sorted funds based on their average future risk-adjusted returns.

Jeffrey Ptak, James Li | Dec 11, 2017


Morningstar Equity Research Methodology

This document details the methodology behind the Morningstar Rating for stocks, which offers investors and advisors a tool to assess an equity's intrinsic value against its current market price.

Morningstar | Mar 15, 2017


Estimated Net Cash Flow Methodology

Morningstar calculates estimated net cash flow for global open-end funds and ETFs, an estimate of the money put in or withdrawn by fund investors, accounting for reinvestment of distributions.

Morningstar Analysts | Aug. 31, 2018


Morningstar Quantitative Rating for Funds Methodology

To expand the number of funds we cover, the Morningstar Quantitative Rating™ for funds is created with a machine learning model that uses the decision-making processes of our analysts, their past ratings decisions, and the data used to support those decisions.

Lee Davidson | Jul 12, 2018


Examining the Morningstar Quantitative Rating for Funds

Read five event studies on the Morningstar Quantitative Rating in its first year of existence. By analyzing the ratings for all funds, we find insights into the Morningstar Category system, fund companies, and fund performance.

Madison Sargis, Timothy Strauts | Aug 27, 2018


Morningstar Style Box Methodology

The Morningstar Style Box™ was introduced in 1992 to help investors and advisors determine the investment style of a fund. It provides an intuitive visual representation of style that helps investors build better portfolios and monitor them more precisely.

Morningstar | Feb 28, 2018


Morningstar Rating for Funds Methodology

This methodology describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating™ for funds (commonly called the “star rating”).

Morningstar Analysts | Nov 01, 2016


The Morningstar Rating for Funds: Analyzing the Performance of the Star Rating Globally

Morningstar examines the efficacy of the Morningstar Rating for funds, popularly known as the star rating, on its ability to predict risk-adjusted fund returns. We found that the star rating had some moderate predictive power during our sample period.

Jeffrey Ptak | Nov 10, 2016


Morningstar U.S. CMBS General Ratings Methodology

This methodology describes Morningstar’s approach to issuing letter-grade ratings for commercial mortgage-backed securities at issuance and during surveillance.

Morningstar | Feb 01, 2017


A Framework for Analyzing Multifactor Funds

We present a framework to help investors better understand equity multifactor funds approaches to portfolio construction and bring it to life by applying the framework to some multifactor funds in a series of fund profiles.

Alex Bryan, Ben Johnson | Jun 11, 2018


Morningstar Low Carbon Designation

This is the methodology for Morningstar® Low Carbon Designation™, which is assigned to portfolios that have low carbon-risk scores and low levels of fossil-fuel exposure.

Jon Hale | Apr 30, 2018


Morningstar Global Category Classifications

This document specifies the category classifications Morningstar maps to managed investment vehicles globally. The classifications are mappings from local and regional Morningstar Category for Funds classifications. The mapping enables users to associate similar vehicles from multiple geographies.

Morningstar | Oct 01, 2018


Morningstar Category for Funds Definitions

Morningstar assigns categories to multiple types of vehicles, including mutual funds, ETFs, variable annuities, and separate accounts. A vehicle is placed in a given category based on their average holdings statistics over the past three years. Morningstar’s manager research team reviews and approves of all category assignments.

Morningstar | Apr 01, 2018


Active Share in European Equity Funds

We study a subset of European funds investing in European equities to see how their active share has developed over time, and evaluate how the active share measure might be used as a tool to aid fund selection.

By Mathieu Caquineau, Mattias Mottola | Mar 01, 2016


More Moats, More Profits

We find evidence that the presence of economic moats is increasing among the world’s largest firms, suggesting that elevated profit margins relative to historical levels may not completely disappear when the business cycle turns.

Damien Conover | Apr 09, 2018


Morningstar Analyst Rating for ETFs and Index Funds Methodology

This document describes the methodology behind the Morningstar Analyst Rating™ for funds, the summary expression of our forward-looking analysis of a fund. Ratings are assigned globally on a five-tier scale. Our global analyst team has identified five key areas that we believe are crucial to predicting the future success of funds People, Parent, Process, Performance, and Price.

Morningstar | Sep 01, 2016


Morningstar® Analyst Rating™ for Separately Managed Accounts and Collective Investment Trusts

Morningstar's approach to rating SMAs and CITs is consistent with its global research philosophy for mutual funds and other managed investments.

Morningstar | Nov. 19, 2018


Morningstar Extended Performance Methodology

Morningstar created extended performance statistics to connect the inception date of a new share class or distribution channel and the inception date of the original portfolio. This helps investors see how the portfolio as a whole has performed over time.

Morningstar | Sep 05, 2018


A Global Guide To Strategic-Beta Exchange-Traded Products

Learn about the state of the global strategic-beta exchange-traded products landscape. As of June 30, 2017, there were 1,320 strategic-beta ETPs, with collective assets under management of approximately $707 billion worldwide.

Ben Johnson | Sep 07, 2017


Morningstar Sustainability Rating for Funds Methodology

The Morningstar Sustainability Rating helps investors use environmental, social, and governance, or ESG, information to evaluate portfolios. The rating provides a reliable, objective way to evaluate how their portfolios are meeting ESG challenges.

Madison Sargis | Oct 31, 2018


Morningstar Portfolio Product Involvement Methodology

The Morningstar Portfolio Product Involvement metrics are holdings-based calculations that use company-level analytics from Sustainalytics, a leading ESG research provider. They reflect the portfolio’s exposure to involvement in a range of products, services, and business activities.

Morningstar | Sep 28, 2017


Morningstar Quantitative Rating for Funds Input Data Methodology

The Morningstar Quantitative Rating™ for funds generates analyst-driven insights for all open-end funds. By ranking funds on a comparable scale, our system lets you quickly see Morningstar's relative opinion for each fund's pillars.

Lee Davidson | Jun 26, 2017


Morningstar Fee Level for Funds Methodology - U.S.

The Morningstar Fee Level for funds was developed to help investors compare an investment vehicle’s relative level of fees with those of similar investment vehicles. The methodology applies to all U.S.–based funds and subaccounts in our database.

Morningstar | Aug 31, 2017


Morningstar Total Return Index Methodology

This document details the methodology for the Morningstar Total Return Index, calculated at the fund level and representing the value over time of one share purchased and owned since inception, assuming all dividends and distributions are reinvested.

Morningstar | Aug 31, 2017


Morningstar Category Average Methodology

Morningstar category averages represent the average return of funds within their category over time. Morningstar creates a daily total return index series, or TRI, as well as monthly, quarterly, and annual averages of return and non-return data for each category.

Morningstar | Aug 31, 2017


Morningstar Global Fixed Income Classification Methodology

A guide to the Morningstar classification system for Fixed Income, cash and cash equivalents. This methodology document addresses the Morningstar global fixed income classification.

Morningstar | Oct 13, 2017


Performance Persistence Among U.S. Mutual Funds

It's no secret that investors often interpret past performance as evidence of manager skill and put their money to work accordingly. Because performance-chasing is so prevalent, Morningstar conducted this study to assess whether there is any merit to selecting actively managed mutual funds based on past performance.

Alex Bryan | Jan 01, 2016


The Impact of the Default Investment Decision on Participant Deferral Rates: Managed Accounts vs. Target-Date Funds

Using a dataset of 66,297 participants from 195 defined contribution retirement plans that offer either a target-date fund or managed accounts as the plan default investment, we analyze the effect this decision may have on participant deferral rates.

David Blanchett, Daniel Bruns | Oct 17, 2016


The Impact of Expert Guidance on Participant Savings and Investment Behaviors

This paper discusses the potential benefits of Expert Guidance, or professional online retirement advice, on the savings and investing decisions of individual participants of defined contribution plans, such as 401(k) plans.

David Blanchett | Aug 20, 2014


Alpha, Beta, and Now... Gamma

Here, we present a concept that we call “Gamma,” designed to quantify the additional value that can be achieved by an individual investor from making more intelligent financial planning decisions.

David Blanchett, Paul Kaplan | Aug 28, 2013


Estimating the True Cost of Retirement

When consumption and funding levels are combined and correctly modeled, the true cost of retirement is highly personalized based on each household's unique facts and circumstances, and is likely to be lower than amounts determined using traditional models.

David Blanchett | Nov 05, 2013


Morningstar After-Tax Return Methodology

After-tax returns are measures of fund performance that take into account the taxes a hypothetical investor pays on fund distributions and capital gains. While a fund’s total return reflects the performance of the underlying securities, the after-tax return reflects the net gains or losses that an investor receives after paying taxes.

Morningstar Research | March, 2019

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