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Morningstar to launch Analyst Ratings for ETFs, and enhance the Morningstar Rating for Funds

Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced plans to apply the forward-looking Morningstar Analyst Rating™ to exchange-traded funds (ETFs) globally, allowing investors to more easily compare investments across fund types. With rollout anticipated later this year, Morningstar will initially assign Morningstar Analyst Ratings to approximately 300 ETFs, of which around 100 will be domiciled in Europe, with coverage expected to expand over time.

The Morningstar Analyst Rating is a qualitative rating that signals Morningstar analysts’ conviction in a fund’s ability to outperform relevant peers, including both mutual funds and ETFs, on a risk-adjusted basis over a full market cycle. The Morningstar Analyst Rating follows a five-tiered scale: Gold, Silver, Bronze, Neutral, and Negative, with analysts arriving at a rating through an assessment of five key pillars: process, performance, people, parent, and price.

Hortense Bioy, Morningstar’s Director of European Passive Funds Research comments:

“With ETFs increasingly used strategically to build investment portfolios and the range of ETF options continuing to grow, investors need help to make informed decisions. We’ve been providing qualitative research and analyst reports on some 650 ETFs worldwide for more than eight years, and launched Analyst Ratings for index funds in the UK in 2013. Assigning the qualitative Morningstar Analyst Rating to ETFs is a natural extension of our research, intended to further support investors in their due diligence efforts.”

The new Analyst Ratings for ETFs will be available in Morningstar’s flagship platforms for investors including, global investment analysis platform Morningstar DirectSM, and global practice and portfolio management solutions Morningstar® Advisor WorkstationSM and Morningstar OfficeSM. The Analyst Ratings for ETFs are also available for licensing through Morningstar® Data. More information, including the Morningstar Analyst Rating methodology, videos, and frequently asked questions and answers, is available here.

In addition, Morningstar will remove the load, or commission/sales charge, adjustment from the Morningstar Rating, commonly known as the star rating, calculation globally. The updated Morningstar Rating methodology for funds is available here.

“We’ve found that fewer investors are paying commissions or sales charges, which is why we’re removing the load adjustment from the Morningstar Rating calculation. When we established the Morningstar Rating methodology, these charges were much more common and we saw a need to highlight the cost for investors. With this change, we’re focused on both fairly evaluating the industry’s past, as well as helping investors effectively navigate the future,” Bioy said.

Morningstar has approximately 115 manager research analysts worldwide who cover approximately 4,000 funds. The company provides data on approximately 205,600 open-end mutual funds, 10,300 closed-end funds, and 13,900 exchange-traded product listings as at 30 June, 2016.