Morningstar Analysts Now Rate Index Trackers

You can now compare passive funds such as trackers with their actively-managed counterparts, helping you make better investment decisions

Ben Johnson 3 December, 2013 | 3:24PM

Today, we are pleased to introduce forward-looking, analyst-driven fund ratings for 25 of the most popular index funds in the UK. Each of the funds has been assigned a Morningstar Analyst Rating for funds, which supplements the Morningstar Rating for funds (commonly known as the "star rating"). The star ratings assign a fund one to five stars based on its risk-adjusted past performance versus its peers in the same category. In addition, we have now launched in-depth Analyst Reports for the newly-rated tracker funds so investors can benefit from our analysts' opinion on these funds' future prospects.

The growing popularity of index funds and exchange-traded products in the wake of the implementation of the Retail Distribution Review has underscored the need to expand the reach of our research efforts into the realm of traditional tracker funds and to measure them using the common global standard that is our Morningstar Analyst Rating. This research will ultimately help British investors to make better informed decisions when selecting funds.

What Do Our Analyst Ratings Mean?

The five-tiered Morningstar Analyst Rating scale has three positive levels—Gold, Silver and Bronze—in addition to Neutral and Negative ratings. Analysts arrive at a rating through an evaluation of five key pillars they believe are crucial to predicting the future success of a fund, considering both quantitative as well as qualitative factors: People, Process, Parent, Performance and Price. Morningstar analysts score these five pillars as Positive, Neutral or Negative, which are then combined for the overall rating. The Morningstar Analyst Rating Methodology Document can be found here.

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The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

About Author

Ben Johnson

Ben Johnson  is director of passive funds research at Morningstar.

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