The new Quickrank design is much easier to navigate and use, and includes many new datapoints. Our overriding goal is to gi
ve you a more complete, easily sortable picture of the funds you select.
Total Expense Ratio (TER): We firmly believe this is a key datapoint for investors to consider. Many investors focus only on the annual management charge (AMC), but this leaves out other ongoing fees they will need to pay. TERs help you understand what percentage of fund assets are going towards fund expenses on an annual basis, including management fees (the AMC), operating costs, and other asset-based fees (trading costs incurred by the fund manager are not included). As the net assets of the fund grow, the expense percentage should ideally diminish as expenses are spread across the wider base. Funds may also opt to waive all or a portion of the expenses that make up their overall expense ratio.
You’ll notice that for some funds, this field is blank. The data point has only recently begun to be required for most funds in the UK (non-UCITS retail schemes are exempt) and has not heretofore been widely available. Check back frequently--we expect our TER coverage to increase rapidly.
It’s also worth noting that we use UCITS-compliant TERs. For funds-of-funds, these include the cost of the underlying funds. The Fitzrovia TERs published by the IMA and others do not include the expenses of the underlying funds, and therefore substantially understate the ongoing costs of funds-of-funds. We believe the UCITS measure gives investors a more accurate picture of what they’re actually paying.
Morningstar Risk: This is a proprietary Morningstar data point, and it’s an assessment of the variations in a fund's monthly returns, with an emphasis on downside variations, in comparison to other funds in its Morningstar category. In each Morningstar Category, the 10% of funds with the lowest measured risk are described as Low Risk, the next 22.5% as Below Average, the middle 35% as Average, the next 22.5% as Above Average, and the top 10% as High. Morningstar Risk is measured for up to three time periods (three, five, and 10 years). These separate measures are then weighted and averaged to produce an overall measure for the fund. Funds with less than three years of performance history are not rated. It’s important to note that a fund may be low-risk relative to its category, but still be a high-risk offering on an absolute basis, or vice-versa. For example, an Emerging Europe fund might take on much less risk than other Emerging Europe funds, but it is still likely to be much riskier than a large-cap UK equity fund.
Average Market Cap: The average market capitalization of a fund's equity portfolio gives you a measure of the size of the companies in which the fund invests. (Market capitalization is calculated by multiplying the number of a company's shares outstanding by its price per share.) At Morningstar we calculate this figure by taking the geometric mean of the market capitalisations of the stocks a fund owns. As with most of our portfolio data points, we are able to ensure that the calculation is uniform across funds because we collect each fund’s complete underlying holdings (not just the top 10) and calculate the figure the exact same way for every fund. This means you can compare funds’ average market caps without concern that they might be calculated using different methodologies.
Total Assets: Net-asset figures are useful in gauging a fund's size, agility, and popularity. Generally speaking, as a fund grows larger in size, it will become more difficult for the manager to efficiently build and/or exit positions in smaller-cap and less liquid stocks. A fund that has outperformed its peers on the basis of investing in such companies may thus find it difficult to sustain that outperformance as it grows in size. However, larger funds should be able to pass along cost savings to investors by realising economies of scale.
Average Credit Quality: This field gives a snapshot of the overall credit quality of funds that invest a substantial amount of assets in bonds. It is an average of each bond's credit rating, adjusted for its relative weighting in the portfolio. Average credit quality is used to determine the vertical axis of Morningstar’s bond style boxes.
Average Duration: Duration gives you an indication of how sensitive a bond fund is to changes in interest rates. Bond prices move inversely with interest rates, i.e., as interest rates rise, bond prices fall, and as interest rates fall, bond prices rise. The longer a fund’s duration, the greater is the expected magnitude of its price change in response to a change in interest rates. Put simply, investors can expect funds with longer durations to be more volatile than funds with shorter durations.
Duration is not the same as maturity—maturity simply gives you the time remaining until a bond’s principal is due to be repaid. This heavily influences a bond’s interest-rate sensitivity, but fails to account for the size and timing of a bond’s cash flows. With the exception of zero-coupon issues, a bond’s duration will always be shorter than its maturity.
Manager Tenure: This is the number of years that the current manager has been the portfolio manager of the fund. For funds with more than one manager, the average tenure is shown. If the fund designates the manager as a Management Team and does not disclose the names of the portfolio manager or co-portfolio managers to Morningstar, Manager Tenure will appear as a dash for the fund.
Enjoy the new site and check back for future improvements, as we have many more planned. As always, please don’t hesitate to let us know what you think.
