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Methodology Documents

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Methodology Documents

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.
Methodology Documents

Far from experiencing a slowdown, taxable bond and international equity saw a lot of activity in July. The two Morningstar category groups attracted $34.7 billion and $23.0 billion, respectively. For both, the majority of these flows came from passive funds. Active flows, in the meantime, remained positive and considerable in size.
Methodology Documents

Taxable Bond and International Equity Continue to Dominate Flows Investors continued to stream money into taxable-bond and international-equity funds in June. Unlike in previous months, the taxable-bond Morningstar category group saw higher inflows on the passive front than on the active one, although active flows still remained substantial at $14.4 billion.
Methodology Documents

After five encouraging months and a so-and-so April, the U.S. equity category group slid into outflow territory in May, with total redemptions of $3.1 billion. Taxable bond remained the overall leader with inflows of $36.9 billion, and international equity came in a close second, attracting $35.7 billion.
Methodology Documents

The Morningstar Portfolio Product Involvement metrics measure a portfolio’s exposure to involvement in a range of products, services, and business activities. The metrics are holdings-based calculations that use company-level analytics from Sustainalytics, a leading ESG research provider. The metrics are calculated for managed products globally using Morningstar’s portfolio holdings database.
Methodology Documents

For investment portfolios that hold meaningful levels of fixed-income holdings, Morningstar produces a number of calculated fixed-income analytic measures. Portfolio analytic measures are created by first calculating corresponding holding-level measures and then aggregating the values to a portfolio level through a process known as holding-based analytics.
Methodology Documents

For managed investments such as mutual funds, Morningstar calculates average effective maturity. This measure is the holding-weighted average of the terms of the individual instruments within the portfolio. With this measure, investors can analyze exposure to interest-rate risks and reinvestment risks as well as estimate whether an investment aligns with future liability needs.
Methodology Documents

Fixed-income analysis is inherently an exercise in the measurement of future cash flows. Payments of interest on principal invested constitute the primary means of return to fixed-income investors with the expectation that the principal will be repaid upon maturity. Therefore, measuring the expected rate of return and potential risks to these payments is of paramount importance.
Methodology Documents

After four months during which U.S. and international-equity funds attracted similar inflows, international equity took the lead in the equity space with a little over $21 billion in total flows. U.S. equity's winning streak seems to have waned, as the category group received only a meager $280 million in April 2017.
Methodology Documents

Morningstar Category classifications sorts portfolios into peer groups based on their holdings. The categories help investors identify the top performing funds, assess potential risk, and build well-diversified portfolios. Here is how those categories are decided upon and funds assigned to them.
Methodology Documents

Some Flows Are Going Into Equity, but Fixed Income Is Still in the Lead Taxable-bond funds attracted the highest inflows once again in March, even higher than they had in February. The flow this month was almost evenly distributed between active and passive taxable-bond funds, underlining that in fixed income, as opposed to equity, active management is still very much alive.
Methodology Documents

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.
Methodology Documents

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

Bonds Still in Favor, With U.S. Equity Close Behind Taxable-bond funds remained the undisputed favorites in February, attracting $35.5 billion in estimated net flows. U.S. equity funds, however, received double the flows they had taken in the previous month.
Methodology Documents

Any new beginning is uncertain, and this held true for markets in the first month of 2017. The new president’s promises of tax cuts and infrastructure spending appeared to spur newfound confidence in U.S. equities late last year, driving flows into U.S.-equity funds in November and December. January, however, saw a much smaller amount stream into U.S.-equity funds, and the majority of the flows redirected to fixed-income and international-equity funds.
Methodology Documents

Morningstar data point explanation.
Methodology Documents

If you help your clients raise financially fit kids, everyone wins: Your clients get peace of mind that their children will be better equipped for life on their own, the children get a financial head start to prepare them for financial independence, and your practice benefits from stronger client relationships and, potentially, a new generation of clients. Our new paper examines: Why learning by example isn’t enough to prepare kids for financial independence. Simple rules of thumb that advisors can encourage their clients to use when teaching their children about money and why parents should be more transparent with their children about their money situation.
Methodology Documents

Helping your clients navigate personal relationships might not be your favorite talking point, but your willingness to tackle the issue head-on could be key for your business. Our paper, Financial Turning Points: Relationships, Marriage, and Divorce, examines: How prenuptial agreements and “freedom funds” should be seen as romantic, rather than restricting. How advisors can help their clients learn to argue productively—and why they should. Why tracing financial behavior back to underlying needs is important when married clients have different attitudes about money. How advisors can help clients cope with post-divorce financial reality.
Methodology Documents

Morningstar asks fund companies to send the following information on a monthly or quarterly basis for each of their fixed income and allocation funds.
Methodology Documents

Morningstar's Credit Ratings ("Morningstar") credit rating process builds upon the knowledge of companies, industries, and financial markets that Morningstar has been accumulating for more than a decade. Morningstar’s credit rating methodology is forward-looking and based on fundamental company research including but not limited to our expectations of future cash flows.
Methodology Documents

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.
Methodology Documents

The Morningstar Category™ classification system for funds lets institutions, advisers and investors effectively compare like funds.
Methodology Documents

The Morningstar Category™ classification system for funds lets institutions, advisers and investors effectively compare like funds.
Methodology Documents

Morningstar Indexes were created to provide investors with accurate benchmarks for performance measurement, as well as offering discrete building blocks for portfolio construction.
Methodology Documents

Morningstar’s aim is to help investors determine a Listed Investment Companies (LICs) overall investment merit to help them construct diversified portfolios and achieve their goals.
Methodology Documents

This document supplements the methodology document for the Morningstar Style BoxTM. This provides additional information about how to rescale the size score for a fund
Methodology Documents

The Sector Delta is an equilateral triangle that depicts a portfolio’s super sector allocation, relative to a benchmark, on a two dimensional space.
Methodology Documents

Morningstar has a rich tradition of holdings-based analysis of mutual funds and other investment portfolios. The portfolio holdings provide insight into the manager’s strategy and help investors determine if an investment might be appropriate for them.
Methodology Documents

The Similar Funds tool will generate a list of investments that are similar to a user-specified offering. This methodology is based upon several factors including the category, special criteria, portfolio allocation, and performance of the fund provided.
Methodology Documents

An essential complement to our database of investment information and our suite of quantitative research tools, Morningstar's target-date series analysis focuses on helping fiduciaries make better investment decisions with plan participants' retirement funds