Morningstar changes tack on rating process
Morningstarhas changed its qualitative ratings model that will extend both the range and number of funds rated by the research house without changing its 50/50 qualitative/quantitative star rating model.
From next month, the qualitative research process will shift from a vertical ‘top down’ analysis of a company’s business and funds to a horizontal approach across all companies and funds.
This will significantly increase the number of fund managers Morningstar rates each year from nine to approximately 36 fund managers.
The enhancements to Morningstar’s qualitative ratings process means that all the fund managers offering products in a particular asset class will be assessed at the same time, improving the timeliness and currency of Morningstar’s analysis as well as its comparability.
The existing five underlying qualitative components will be consolidated into two enhanced components. These will be the Business and Management Strength Rating Component, which will look in depth at a company’s commercial strengths and the quality of their management processes.
The Sector Strength Rating Component will examine a fund manager’s relative competencies in the various asset classes.
“We’ll substantially increase our coverage of the market, while maintaining the standard and integrity of the research which underlies our ratings and commentaries,” Chee says.
Morningstar, which launched its star ratings in the Australian market four years ago, has for some time been looking to improve its qualitative ratings processes.
“We probably have had complaints from enough fund manages that we were not rating enough managers,” Morningstar’s head of research Daisy Chee says.
Recommended for you
The FSCP has announced its latest verdict, suspending an adviser’s registration for failing to comply with his obligations when providing advice to three clients.
Having sold Madison to Infocus earlier this year, Clime has now set up a new financial advice licensee with eight advisers.
With licensees such as Insignia looking to AI for advice efficiencies, they are being urged to write clear AI policies as soon as possible to prevent a “Wild West” of providers being used by their practices.
Iress has revealed the number of clients per adviser that top advice firms serve, as well as how many client meetings they conduct each week.
