Morningstar Fund Ratings Adopt a Stricter Curve
Winning a coveted Gold rating from Morningstar's fund analysts will become tougher under newly tightened criteria.
Morningstar is overhauling its system of mutual fund ratings. The initial batch went into effect Oct. 31, with the rest rolling out over the ensuing 12 months. Jeff Ptak, global director of manager research at Morningstar, estimates the number of downgrades will outnumber upgrades by roughly 2-1, with costlier funds facing the most downgrades once the initial rerating of the funds is completed.
Under the old methodology, Morningstar's highly respected analysts haven't been able to consistently pick mutual funds or exchange-traded funds (ETFs) that beat their benchmark index despite years of trying.
That might change under the new methodology.