MEDALIST RATINGS
Morningstar's New Medalist Ratings and Increasing Our Coverage
The Medalist Rating will deliver a single, effective forward-looking rating that will allow advisers, AFSLs, and investors to screen, sort, and rank to discover best-in-class managed investment products.
The Morningstar Medalist Rating will expand access to our market-leading ratings whilst maintaining our independent business model and leveraging our valuable global analyst capability. With expanded coverage, users of our Research will be able to assess a broader universe of fund and ETF managed investments for inclusion into APLs, model portfolios and to support client recommendations, powered by Morningstar’s well-regarded Research Methodology.
With the official launch, slated for 3 May 2023, the Morningstar Analyst Rating™ depicted by our Gold, Silver, Bronze medals will be known as the Morningstar Medalist Rating. The methodology that underpins the rating is not changing, and the three pillars — People, Process, and Parent — will continue to form the basis for the ratings.
Under the Medalist Rating, how these three pillars are supported will evolve. Currently, only an analyst may assign a pillar. In 2023, in order to scale our ratings universe, pillar assessments by Morningstar analysts globally, may be assigned to related strategies, and pillars not currently assessed by analysts will be assessed by our proprietary machine-learning algorithm subject to appropriate levels of data collection from the underlying managers. Morningstar will apply the superscript “Q” designation to pillar scores assigned by the algorithm to help investors distinguish between pillars assessed by analysts and those assessed by the algorithm. To be clear, an analyst-assigned pillar assessment always takes precedence over the algorithm.
The algorithm has been operational since 2012, and Morningstar has used it successfully for five years to assess managed investments that analysts do not cover in the U.S. and Europe markets. The algorithm has also been operating in Australia and New Zealand for five years but has been suppressed from customer view. This algorithmic model has been designed to scale our analysts’ insights and replicate analyst processes as faithfully as possible.
Morningstar does not expect any material impact with the ratings it assigns to managed investments with this change.
Over time, we will see increases to our forward-looking ratings coverage driven by increases of data from managers; and the broadening of the Medalist Rating capability to rate other managed investment security types.
The Medalist Rating will deliver a single, effective forward-looking rating that will allow advisers, AFSLs, and investors to screen, sort, and rank to discover best-in-class managed investment products.
To get more information on the algorithm that works within the Medalist Rating system and its application globally, please see the below links:
Introducing the Morningstar Medalist Rating by Lee Davidson, Head of Global Manager Research and Global Quantitative Research
Rating Morningstar’s Fund Ratings by Jeffrey Ptak, Chief Ratings Officer