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Methodology Documents

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Methodology Documents

Diversified U.S. equity funds and diversified foreign equity funds are categorized based on the three-year average of the fund’s Style Box coordinates (Raw X Value-Growth Score, Raw Y Size Score).
Methodology Documents

To help investors understand the different levels of risk of investing in the various categories of funds, Morningstar will calculate a risk level for each of its fund peer group.
Methodology Documents

Each security in a fund portfolio is assigned a detailed asset classification, known as the Detail Type Id. In September 2011 Morningstar updated the list of Detail Type codes.
Methodology Documents

Performance attribution analysis consists of comparing a portfolio's performance with that of a benchmark and decomposing the excess return into pieces to explain the impact of various portfolio management decisions.
Methodology Documents

In Canada, Fixed Income funds that are displayed on Morningstar tools may be subject to two different methodologies depending on which tool they appear on.
Methodology Documents

The updated Morningstar Style Box provides an intuitive visual representation of style that helps investors build better portfolios and monitor them more accurately. This methodology document addresses the Morningstar Fixed-Income Style Box™. The Morningstar Style Box helps investors and advisors determine the investment style of a fund.
Methodology Documents

The data that drive the fixed income style box is surveyed from fund companies. Morningstar asks fund companies to send the following information on a monthly or quarterly basis for each of their fixed-income and allocation funds.
Methodology Documents

Over the last decade, 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.
Methodology Documents

Sector groups and sectors can be defined by the parameters detailed in the methodology and based on the portfolio statistics of the most recent portfolio holdings data
Methodology Documents

There are multiple ways to define a fund’s inception date for purposes of return and ratings calculations.
Methodology Documents

Portfolio diversification is generally thought of in terms of market capitalization and investment style, yet sector diversification is equally important.
Methodology Documents

Investors often evaluate how reasonable a stock’s price is by looking at a price ratio, such as price-to-earnings (P/E), price-to-book (P/B), price-to-cash flow (P/C), or price-to-sales (P/S).
Methodology Documents

Morningstar's Strategy Database identifies investment undertakings managed by a single team following the same investment process.
Methodology Documents

Synthetic ETFs are exchange-traded funds that use over-the-counter derivatives to replicate an index return.
Methodology Documents

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

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

Morningstar Indexes were created to provide investors with accurate benchmarks for performance measurement, as well as offering discrete building blocks for portfolio construction.
Methodology Documents

Morningstar’s aim is to help investors determine a Listed Investment Companies (LICs) overall investment merit to help them construct diversified portfolios and achieve their goals.
Methodology Documents

This document supplements the methodology document for the Morningstar Style BoxTM. This provides additional information about how to rescale the size score for a fund
Methodology Documents

The Sector Delta is an equilateral triangle that depicts a portfolio’s super sector allocation, relative to a benchmark, on a two dimensional space.
Methodology Documents

Morningstar has a rich tradition of holdings-based analysis of mutual funds and other investment portfolios. The portfolio holdings provide insight into the manager’s strategy and help investors determine if an investment might be appropriate for them.
Methodology Documents

The Similar Funds tool will generate a list of investments that are similar to a user-specified offering. This methodology is based upon several factors including the category, special criteria, portfolio allocation, and performance of the fund provided.
Methodology Documents

An essential complement to our database of investment information and our suite of quantitative research tools, Morningstar's target-date series analysis focuses on helping fiduciaries make better investment decisions with plan participants' retirement funds
Methodology Documents

Morningstar Credit Ratings Definitions and Other Related Opinions and Identifiers This document sets forth Morningstar's credit definitions, ratings symbols and other related opinions and identifiers for evaluating the credit risk in structured finance transactions and corporate and financial institution obligations.
Methodology Documents

Ratings of individual debt instruments may be adjusted up or down from the Consolidated Corporate Rating to take into account the individual security's priority of payment. Priority of payment for an individual debt instrument is determined by its issuer's place in the corporate structure, its seniority with respect to other debt, and the collateral securing it (if any).
Methodology Documents

Morningstar's bank credit rating methodology is based on the same key components, or pillars, as its methodology for nonfinancial corporations: Business Risk, Solvency, Distance to Default, and a bank stress test, which is analogous to the Cash Flow Cushion for nonfinancial corporations. The methodology combines qualitative judgments with observable financial and market data to arrive at a model-derived credit score. However, the model score is only an input to the rating committee's final rating decision. The rating committee may accept or modify the model score to take into account trends in performance, anticipated company actions, or macroeconomic developments that may not be reflected in the model.
Methodology Documents

This document is for the investment managers, transfer agents and custodians who send portfolio reports to Morningstar. It covers how portfolio files should be organized in order to ensure that Morningstar can process files in a timely and accurate manner. In particular, it references futures, forwards, short positions, swaps, and options that are held by mutual funds and other managed products.
Methodology Documents

Estimated holding cost, tracking volatility, market impact cost, and portfolio concentration are all data points used in our ETF ratings. In this document, we describe the method of calculation for each of these points.