Methodology Documents

A guide to the methodology underpinning the fixed income style box for Chilean funds.

Morningstar asks fund companies to send the following information on a monthly or quarterly basis for each of their fixed income and allocation funds.

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

This project aims to classify asset types at the detailed level of paper holdings for fixed-income or debt-oriented schemes, as disclosed by asset-management companies in their holding data for such schemes.

Morningstar's Credit Ratings ("Morningstar") credit rating process builds upon the knowledge of companies, industries, and financial markets that Morningstar has been accumulating for more than a decade. Morningstar’s credit rating methodology is forward-looking and based on fundamental company research including but not limited to our expectations of future cash flows.

This document describes the methodology behind the Morningstar Analyst Rating™ for funds; the summary expression of our forward-looking analysis of a fund. Ratings are assigned globally on a five-tier scale. Our global analyst team has identified five key areas that we believe are crucial to predicting the future success of funds: People, Parent, Process, Performance, and Price.

The paper details Global Industry Classification (GICS) four level breakdown.

The paper describes the use of Monte Carlo simulations in determing investor wealth in EnCorr.

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).

The paper outlines category definitions applicable to the Hong Kong market.

The paper outlines category definitions applicable to the Spanish market.

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.

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.

In MM, 2010 Morningstar introduced a new percentile ranking methodology called Distinct Portfolio Category Ranks.

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.

The paper outlines different expense ratio applicable to managed products.

This methodology paper is designed by Morningstar Europe to provide technical guidance and govern all requests by fund providers wishing to append track records of one collective investment scheme to that of another.

Morningstar places fixed income funds in one of the nine squares of the Morningstar Style Box based on each fund’s duration and average credit quality.

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.

The Morningstar Style Box provides an intuitive visual representation of style that helps investors build better portfolios and monitor them more accurately

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.

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.

The paper outlines global category definitions.

Morningstar’s proprietary classification system is comprised of 11 sectors, 69 industry groups and 148 industries.

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

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

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

The Morningstar Manager Benchmarks offer a distinct view into a full range of managed investments for incisive performance, portfolio, and operations data analysis that better captures how money mangers and consultants view the manager and investment universes.

Numerous academic studies have shown the existence of a momentum effect in stock performance.

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).

All managed products are subject to the risk that they may lose value because of the strategies they pursue, the types of securities they invest in, and the uncertainties of investing in general.

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

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

The Federal Reserve Board publishes a group of Treasury bond interest rates of various maturities. These are named Treasury Constant Maturities, the best known being the Ten-Year Treasury Constant Maturity.

For an investor, risk is not merely the volatility of returns, but the possibility of losing money.

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

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

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

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

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.

The paper details Morningstar's custom yield calculation.

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

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

When it comes to the benchmarking of target maturity funds, the cart has been in front of the horse.

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.

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.

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

In its annual Target-Date Industry Survey, Morningstar shines a sweeping light across target-date funds, which have become a primary tool for Americans’ retirement savings.

A commonly used measure of return volatility is the standard deviation of monthly returns multiplied by to express it in the same unit as annual return

Morningstar’s UIT composite return combines the returns of each series within a strategy to measure how the strategy has performed over different time periods