Methodology Documents

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

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

We believe that a company's intrinsic worth results from the future cash flows it can generate. The Morningstar Rating for stocks identifies stocks trading at a discount or premium to their intrinsic worth--or fair value estimate, in Morningstar terminology.

This document describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating for funds (commonly called the “star rating”). This methodology applies to funds receiving a star rating from Morningstar.

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

Morningstar developed the Morningstar Equity Comparables system to give investors and financial professionals an objective benchmark for comparing companies. Morningstar Equity Comparables is genuinely different to other industry classification schemes. We start from the bottom up with comparable companies, as opposed to the top down with sector definitions. For every pair of companies, we determine how similar they are–anywhere from closely comparable to distantly related based on automated analysis of the companies' own business description. We automatically analyse the text of the business description and work out whether companies are talking about similar things as they describe their businesses. Businesses described in similar terms are comparable.

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.

The guide describes how common quantitative Morningstar ranks are determined.

Morningstar provides data on individual securities registered in dozens of countries, but researchers evaluating those investments often have a need to study groups of investments as they're branded in a local market.

The Financial Conduct Authority, or FCA, introduced an environmental, social, and governance-related disclosure regime in 2024: the Sustainability Disclosure Requirements that will affect both asset managers and distributors.

Morningstar’s estimated cash flows dataset for mutual funds represents a detailed analysis designed to assess the capital contributions and withdrawals made by fund investors while accounting for the reinvestment of distributions.

The Morningstar Style Box helps investors determine the investment style of a fund. Different investment styles have different levels of risk that lead to differences in returns. The Morningstar Style Box provides an intuitive and visual representation of style that helps investors build better portfolios and monitor them more precisely.

Augmenting investment research with natural language processing.

Manager tenure is the length of time that an investment manager or team of managers has been leading an investment fund.

Morningstar Category averages are designed to represent the average return of funds within their category over time.

Calculation of Tracking Difference and Tracking Error

The Insiders dataset is a compilation of the insider dealings information for companies in the US and UK markets.

This guide explains the Morningstar approach to capturing key governance functions of investment fund management entities for European markets.

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An explantion of the rules for the selection of the oldest share class.

Morningstar Sustainalytics’ Portfolio Low Carbon Transition Metrics enable investors to understand the degree to which the greenhouse gas emissions—attributable to a portfolio—differ from its fair-share GHG emissions budget.

Australian category classification system

Morningstar calculates and produces comparative analytics to aid product users and investors in vehicle-, strategy-, and firm-level analysis. Morningstar's derived data points are meant to illuminate the connections within, as well as the breadth of, the market as a whole.

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The Morningstar Risk Decomposition tool achieves this by breaking down a portfolio's risk into individual factors and holdings. This capability allows users to analyze the origins of both total and active risk within each portfolio.

The Morningstar Risk Models are a suite of multifactor risk models that help investors identify and evaluate the risk of their portfolios using holdings-based analysis.

This document describes an approach for incorporating structured products, or SPs, into the methodology framework of Morningstar Risk Model, or RM, and Morningstar Portfolio Risk Score, or MPRS.

Commodity Focus Group and Commodity Focus provide an attribute schema for commodities-focused ETF strategies that is granular enough to capture the diversity of the commodities landscape.

The EU taxonomy is a classification system of environmentally sustainable activities that require large EU corporations to disclose information that indicates how aligned the company's revenue, operating expenditure, and capital expenditure are to the EU goal of being net zero by 2050.

Data Content Guide

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

Data Content Guide

Morningstar has conducted qualitative, analyst-driven research on 529 plans since 2004 and rated plans since July 2012. An essential complement to our database of investment information and our suite of quantitative research tools, such as the Morningstar Medalist Rating for 529 investment options, Morningstar's 529 plan analysis has always focused on helping individuals saving for education expenses make better investment decisions.

As awareness around environmental and social issues has grown, more investors than ever have incorporated an environmental, social, and governance focus into their investment processes.

For funds available for sale in the United States.

For portfolios available for sale in the United States.

Morningstar uses a series of six individual models working in unison to algorithmically assess a vehicle and assign the People, Process, and Parent Pillar ratings to it for those assigned Directly, by Algorithm.

Data Content Guide

Morningstar Sustainalytics Low Carbon Transition Rating assesses the degree to which a company’s projected Greenhouse Gas Emissions (GHG) differ from its fair-share budget for GHG emissions.

Selecting a comparable fund on specified criteria.

This document describes an approach for incorporating structured products, or SPs, into the methodology framework of Morningstar Risk Model, or RM, and Morningstar Portfolio Risk Score, or MPRS. This allows investors to assess the risk, in terms of expected return volatility, of a portfolio that contains structured products and other assets such as stocks and bonds.

Introduction to EMT.

How we score rollover recommendations in terms of investment quality, client fit, and service value.

This document describes the rationale for, and the formulas and procedures used in, calculating the Morningstar Rating for funds (commonly called the “star rating”). This methodology applies to funds receiving a star rating from Morningstar.

Morningstar ESG Commitment Level has supplemented our ratings work with a distinct, qualitative, analyst-driven evaluation of asset managers from an environmental, social, and governance perspective.

The Low Carbon Designation is an indicator that the companies held in a portfolio are in general alignment with the transition to a low-carbon economy.

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The portfolio carbon risk metrics aim to help investors identify, quantify, and manage climate-related investment risks, while the percentile and absolute ranks are intended to support informed investment decisions by allowing for comparison of carbon-related risks against peers.

This document provides details on the methodology underlying the suitability framework in the Morningstar Risk Profiler.

The Morningstar Portfolio Risk Score is designed to help assess whether the riskiness of the portfolio matches the risk profile of an investor.

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