Methodology Documents

This document covers the calculation methodologies under the legislative regime after the changes that are effective from March 31, 2024.

Morningstar is introducing "representative cost" fields that will contain the best information on the recurring costs that are charged via the fund itself, and so would not include one-off costs or costs charged by third parties such as advisors or platforms, nor one-off costs charged on entry or exit.

As the investment fund industry continues to grow in size and complexity, it is important that investors have as much information as possible to make educated decisions about their investments. To meet this requirement, Morningstar developed a methodology in 2001 to allow the extension of performance from one collective investment to another.

Morningstar is launching categories for Private Capital funds to help investors make meaningful comparisons between funds that primarily invest in private assets. The Private Capital database is a global one, so we have one set of categories for all private capital funds globally.

The purpose of the US Select Lists is to provide ongoing, high-conviction, qualitatively reviewed lists of investments for use as portfolio building blocks, adopted as the foundation of a firm's own select lists, or, more broadly, as idea generation for product-shelf management and manager-selection functions.

The purpose of the Manager Selection Lists is to provide ongoing, high-conviction, qualitatively reviewed lists of investments for use as portfolio building blocks, adopted as the foundation of a firm's own Select Lists, or, more broadly, as idea generation for product-shelf management and manager-selection functions.

The Morningstar GBP/Euro/USD Model Portfolios are a series of diversified, multi-asset, multimanager portfolios designed to provide investors across a range of risk tolerances access to high-quality, differentiated portfolios at a reasonable price, backed by Morningstar's experience in manager selection, portfolio construction, portfolio monitoring/governance and index construction and peer group categorization.

The Morningstar US Medalist Core Model Portfolios are a series of diversified, multi-asset, multimanager portfolios designed to provide investors across a range of risk tolerances access to differentiated portfolios, backed by Morningstar experience in asset allocation and manager selection.

The Morningstar Portfolio Risk Score assesses risk and diversification to help investors, financial professionals, and those who oversee large groups of financial professionals to assess whether the riskiness of the portfolio matches the risk profile of an investor.

Morningstar collects TNA and fund size data while also calculating derived fund size metrics. This document describes both the collected data as well as the calculated metrics.

To identify investment products that incorporate sustainability features or employ exclusions in their investment process. Morningstar Sustainalytics introduced ESG Intentional Investments data sets in 2019. This document provides an explanation and a definition for each individual attribute and exclusion in the data sets, which can help investors and portfolio managers identify investments and business practices that align with their ESG preferences and criteria.

This document provides a high-level overview and answers for information relevant to the Morningstar Sustainalytics ESG Intentional Attributes and Exclusions data sets.

The European Union Taxonomy is a regulatory classification framework designed to identify environmentally sustainable economic activities with the aim of facilitating sustainable investments and addressing concerns about greenwashing. In addition to corporate disclosures of environmentally sustainable activities, the regulation also mandates that EU-domiciled funds (or funds sold into the EU) should calculate and disclose their portfolio's alignment with the EU taxonomy. This methodology paper describes the calculation of fund-level portfolio metrics.

Morningstar launched a database of UK managed portfolios in July 2022.

Data Content Guide

As a comparative measure of the cost of implementing each portfolio, Morningstar calculates the Prospective Acquired Fund Expense for vehicles within the U.S. and U.K. markets.

Hedge funds have proliferated and become an accepted allocation within institutional investor portfolios, but there is not a generally accepted definition of what constitutes a hedge fund.

Strategy data, coupled with Morningstar's investment-level and rich portfolio holdings data, informs a comprehensive analytical view of where a strategy fits within investor portfolios and the global marketplace.

Morningstar collects information on exchange-traded funds, and where a share class of an ETF is listed on multiple exchanges or more than once on the same exchange, this is known as a cross-listing of an ETF share class.

Closed-end funds can borrow money to help finance the acquisition of their investment portfolio with the hope of enhancing shareholder returns.

Selecting a comparable fund on specified criteria.

Morningstar calculates Potential Capital Gains Exposure to give investors some idea of the potential tax consequences of their investment in a fund.

Index selection and weighting are the two main components of an index’s construction methodology, referring to how constituents are chosen and weighted within an index.

Morningstar has conducted research on active and passive investment strategies and their associated vehicles since 1986.

This guide covers several statistics that are derived from rates of return. They include what are commonly referred to as modern portfolio theory statistics as well as several others. They provide information about individual funds and are also used to compare against other funds, usually within fund categories.

Data Content Guide

Data content guide.

The Morningstar Portfolio Product Involvement metrics measure a portfolio’s exposure to involvement in a range of products, services, and business activities.

Each security in a fund portfolio is assigned a detailed asset classification, known as the Detail Type Id.

The methodology provides information about the currency exposure of the assets and liabilities in which a portfolio is invested.

This paper outlines the key assumptions and details behind our quantitative equity rating methodology.

To evaluate the effectiveness of our quantitative star ratings, we conducted portfolio and event studies over a seven-year backtesting period.

Morningstar has 26 main US CEF peer group categories consisting of 10 equity, 14 fixed-income, and two hybrid categories. The fixed-income categories are further subdivided into taxable and municipal groups.

Morningstar’s Strategy Series database identifies and links together investments across a shared management team and shared investment approach (that is, strategy) that are offered as a spectrum of solutions for investors.

A guide that outlines the methodology Morningstar uses in calculating the expected future yield as of the portfolio date, from the holdings of the portfolio. The measure is based on forward dividend yield (forward yield) for stocks and the yield to maturity of the fixed-income portfolio.

The Morningstar method for the determination of a significant restructuring event for an investment moving between categories.

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.

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.

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

The Morningstar Categories for funds in the Europe/Asia/Africa universe were first established in the early years of the UCITS (Undertaking for Collective Investment in Transferable Securities) Directive to help investors make meaningful comparisons between Investment funds.

The paper defines the Morningstar Categories for the Japan-domiciled open-end funds.

For funds available for sale in the United States.

Morningstar has conducted qualitative, analyst-driven research on 529 plans since 2004. Since July 2012, we have expressed this research through the Morningstar Medalist Rating for 529 College-Savings Plans. An essential complement to our database of investment information and our suite of quantitative research tools, Morningstar's 529 plan analysis has always focused on helping individuals who are saving for education expenses make better investment decisions.

The paper outlines institutional category definitions.

The paper outlines Morningstar Category definitions.

The Morningstar Category™ classifications for 529 investment options were introduced in 2010 to help investors make meaningful comparisons between 529 options.

The paper outlines global category definitions.

Morningstar identifies a Primary Share in Market for open-end funds and exchange-traded funds. This is a proprietary data point and the primary share class is identified by the application of a set of hierarchal criteria.

Within the Separate Account and Model Portfolio databases, Morningstar aims to identify and display different return types that bring transparency to these institutional investments.

Originally the data domain within Morningstar known as Managed Investment Data, or MID, had no formal easy-to-consume mechanism for identifying groups of funds or investment types, also known as universes.