Morningstar Medalist Ratings

Activation Form

All funds that are activated in Morningstar systems, and in a specific set of categories are eligible for a Medalist rating – from inception.

They also require a minimum set of requisite data to be provided for a Medalist Rating to be supported. This includes:

• Product Disclosure Statement.
• Target Market Determination Document.
• Unit price and distribution information (in order to calculate returns).
• Fees and costs.
• Asset Allocation.
• Fund Size and Flow Data.
• Portfolio Holdings Data and the Fixed Interest Survey.
• Manager Information.

Activation is handled by a global team global.newfunds@morningstar.com.

All relevant information regarding activation can be found on our Fund Activation page.

If there are any further requirements for understanding the activation, we have a team of consultants specifically focussed on Australasian domiciled funds that can assist.

Product Disclosure Statement

An active PDS is important that ensure that we the required information to categorise the fund correctly in its appropriate peer group.

Actions to take include:

• Adding a requirement to send your PDS to Morningstar within your PDS roll procedure during the distribution period of that process.
• Send this document to globaldocument@morningstar.com.
• If you have fixed URLS on your website where the documents are always going to be housed; and any updates will be made to the document in that same URL, we can automatically pick this up.
• Please work with globaldocument@morningstar.com and how you want to provide this document to us.
• PDS + Supplementary PDS is required.
• You should also supply the disclosure document(s) at activation of any new funds.

Target Market Determination Document

Under relevant Design and Distribution Obligations (RG274) a Morningstar Medallist Rating cannot be issued without an up-to-date TMD being available.

• The ratings process will cease if we don’t have an up-to-date target market determination (TMD) available at all times.
• The TMD document should be sent to globaldocument@morningstar.com.
• If the fund TMD is following the Financial Services Council (FSC) standard, then the data file must also be provided – This must be provided to fundopacquisition@morningstar.com.
• It is best practice to send both data and documents to both email addresses above for the quickest processing, and seamless validation.
• The TMD document should also be submitted at activation.

Unit Price and Distribution Information

Performance is one of the inputs to the database and the ratings processes.

• Morningstar calculates returns using prices, distributions and any relevant corporate actions.
• On the activation homepage, you will find the industry standard price and distribution files.
• Many fund managers outsource the provision of this data to their third-party administrator.
• We are flexible regarding data formats and source – as long as this stays consistent over time, or we have notice of any changes.
• Please ensure we receive your prices and distributions as soon as they are struck.
• Note that Morningstar only requires CUM prices. We do not need ex prices to calculate your performance.
• We recommend that all providers join our Morningstar Monthly Reconciliation Program (MRR) – It’s a free service and allows us to check our data calculated against your supplied returns and any discrepancies are immediately worked on with you.
• All performance data should be sent through to data.au@morningstar.com.

Fees and Costs

Fees are one of the inputs to the database and the ratings processes.

• We collect fees in a format we developed with the industry to ensure we present the fees and costs in line with the ASIC’s RG97 requirements.
• You should provide the fees file when you send your updated PDS to us to fundopacquisition@morningstar.com.
• We will also survey you annually for your financial year fee figures. When you send your updated fee file with your PDS, please keep the latest FY data you have available in the file.
• The fee file can be confusing for some managers, and our teams are ready to help with any questions. Please contact us at FundOpAcquisition@morningstar.com.

Asset Allocation

The Asset Allocation file is a key determinant of how we categorise your fund and align it with the correct cohort for Medalist Ratings.

• The Asset Allocation file is the industry standard, developed to meet regulatory needs and is commonly used in this market.
• The typical time we receive this file from asset managers is between five and twelve days after month end, each month.
• The file can be sent to portfolioaustralia@morningstar.com.
• All your funds Asset Allocation data can be provided in this file.
• If your fund is white labelled and invests directly in another Australian fund, we can map those options together and source this from the primary fund manager.

Fund Size and Data

Fund size and flows are inputs to the database and the ratings processes.

• Fund sizes can be provided each month, or more commonly every day alongside the price file mentioned above.
• We are flexible as to how we receive the file in terms of formats, so long as its machine readable and consistent over time.
• You should provide your size at the share class level (APIR level) in AUD
• All size data should go to data.au@morningstar.com.
• If your fund is white labelled and invests directly in another Australian fund, we can map those options together and source this from the primary fund manager.

Portfolio Holdings Data and the Fixed Interest Survey

Portfolio holdings and portfolio characteristics (in the case of fixed interest) are key determinants of how we categorise your fund and are inputs to the ratings processes.

• All portfolio holdings must be provided in full.
• We have various processes to suppress holdings data if required, although that is becoming more unusual. Please work with our team to understand these options and how best it can support your goals while enhancing transparency. Please contact us at DataAusNZ@morningstar.com, or reach out to your local data consultant.
• Typical frequency and delays around receipt of portfolio data is either monthly or quarterly and is usually lagged between 15 days to 90 days after end of period.
• If portfolio holding data is not provided at least quarterly, the maximum medal awarded will be Bronze.

Manager Information

Manager experience, tenure, number of portfolio managers per fund and level of manager investment are inputs to the database and the ratings processes.

• The manager information form is found on the activation site. Please provide this at any time there is a manager personnel change.
• We will also request that you update/confirm this once a year – if you haven’t made any changes since your last submission, simply resend the previous file it to us when we request it.
• Add all named portfolio managers to the form.
• Please provide history if you have this available.
• This file can be sent to fundopacquisition@morningstar.com.

Analysts typically review strategies under their coverage annually or as often as material changes warrant. The publish date of the previous Morningstar Managed Investment Report normally provides a guide as to when the strategy will likely be updated.

Where strategies are reviewed algorithmically, the Morningstar Managed Investment Reports are typically updated monthly. Updated reports are expected to be available by the last Wednesday of each month in Australia.

Where strategies are reviewed algorithmically, accurate and updated data is critical. Data must be provided no later than the second Wednesday of each month for it to be considered for the updated report published on the last Wednesday of each month.

Medalist Ratings data and Research Reports are available across Morningstar products including Morningstar Direct, Morningstar’s Adviser Research Centre, and Morningstar Investor.

There are a number of reasons that ratings move around, primarily a change in the Parent, People and Process pillar ratings or a change in fee. Pillar ratings may move up or down depending on the analyst or algorithm’s level of conviction in the strategy’s ability to generate outperformance. Changes in the level of conviction are generally based on a review by an analyst or updated data points assessed by the algorithm. These data points may pertain to the fund or strategy itself, the management team, or the parent company.

Other factors can also affect the Medalist Rating awarded, including but not limited to:

• The reclassification of a strategy in terms of its category or type of investment vehicle (this may result in ineligibility for the Medalist Rating);
• The fund’s relative standing within its Morningstar Category; and
• The ongoing development and updates to the algorithm and methodology.

A Medalist Rating, powered by the algorithm, will be produced only when 80% or greater Data Coverage exists at the fund level. The Data Coverage data point is a summary metric describing the level of data completeness used to generate the overall rating. Changes to the algorithm and methodology may result in a fund’s Data Coverage changing and dropping below 80%.

Please refer to the “Get started” section on this page, the Fund Activation and Ongoing Data sites provide guidance for provision of initial fund data and ongoing fund data.

Morningstar Ratings and Research Reports can be used under license. Please contact your Morningstar account manager or help.au@morningstar.com for further information.

There are three ways a fund may receive a Medalist Rating: an analyst fully covers the fund; the algorithm fully covers the fund; or a combination of both analyst and algorithmic pillar ratings.

1. How does Morningstar make analyst coverage decisions?

Morningstar follows a number of principles in determining which vehicles will be covered by analysts. In making coverage decisions, Morningstar seeks to ensure that users of its research have access to analysis on a broad spectrum of vehicles that are important to them and meet their needs for portfolio construction. Given we do not charge asset managers to rate their strategies, we allocate analyst resourcing where we believe it will have the most impact for investors.

Morningstar frequently canvases its analyst teams and external users of Morningstar’s research to identify offerings that might merit coverage. Regional coverage committees internal to the manager research team must approve all coverage decisions.

2. How does Morningstar make algorithmic coverage decisions?

Algorithmically generated Medalist Ratings are subject to category and data restrictions. A Medalist Rating, powered by the algorithm, will be produced only when 80% or greater Data Coverage exists at the fund level.

3. What are the universes and categories covered?

Analysts may cover and generate Medalist Ratings across most universes, including open-end funds, superannuation and pension funds, exchange-traded funds, and closed-end funds. Analysts may generate Medalist Ratings across most categories.

Algorithmically generated Medalist Ratings cover ETFs and open-end funds only; closed-end funds are excluded. The superannuation, pension, and annuities universes and the managed account and managed portfolio universes will not receive algorithmically generated Medalist Ratings at this stage.

There are a number of categories that will not receive algorithmically generated Medalist Ratings including all alternatives categories: macro trading, multistrategy, systematic trend, “other,” and private debt. These categories are not eligible for algorithmic coverage because of limited peer-group size and limitations on available portfolio data. This also applies to the cash, derivative-income, geared, long-short, commodities and precious metals, global resources, mortgages, unlisted and direct property, equity “other,” and miscellaneous categories.

At this stage, investments within the emerging-markets debt, inflation-linked bond, equity Europe, equity Japan, equity Greater China, global technology, and multisector life stages categories in Australia will not receive algorithmically generated Morningstar Medalist Ratings. Finally, New Zealand categories will not receive algorithmically generated Medalist Ratings.

Data requirements are not met:

• Managed investments must meet data freshness (currency and quality) and completeness requirements to be eligible for Medalist Ratings. A Medalist Rating, powered by the algorithm, will be produced only when 80% or greater Data Coverage exists at the fund level. There are a number of factors that affect the Data Coverage levels – it is not as simple as a three-year performance track record. Parent-level data, manager-level data, and fund-level data are considered by the algorithm.
• Screening logic is applied in certain markets to remove zero-fee share classes (excluding passive funds) that have purchase constraints, as well as share classes for which there is evidence of data irregularities.
• Investments that do not have the necessary fee data available for the most recent month are not eligible for Medalist Ratings.
• Investments must not be flagged as dormant funds.
• Investments included on Morningstar’s compliance list are not eligible for Medalist Ratings. These include investments under the Morningstar brand and investments for which Morningstar has deemed a conflict of interest.

Funds with largely identical strategies that have developed a track record and are rated in an offshore market may be eligible for a Medalist Rating in the Australian market. The key data point linkage is “StrategyID.” Asset managers should contact strategydata@morningstar.com to confirm if the funds are eligible to be linked.