Morningstar Announces New Alternative Fund Categories to Better Classify Alternative Investments

London - 30 August 2011

Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, has added 18 new alternative investment categories to its fund category classification system for UCITS funds available for sale in Europe and Asia.

The new Morningstar alternative fund categories represent a wholesale upgrade in Morningstar’s classification of open-end funds with alternative investment strategies, offering investors clearer descriptions of the underlying strategies deployed within those funds. In particular, the new classifications move away from the term “Absolute Return”, with the previous Morningstar alternative investment categories of EUR Absolute Return, Non-EUR Absolute Return, and also Long-Short, all replaced with new terminology.

Christopher Traulsen, CFA, director of European and Asian fund research for Morningstar comments:
“Absolute Return as a fund category definition has become too associated with a broader industry marketing term that has made performance promises that have often failed to deliver. To make our categories more useful and transparent to investors, we reviewed our alternative peer groups to better categorise funds by the type of strategy deployed. We believe the new alternative categories do a superior job of capturing the range of strategies used by the represented funds, and we’re pleased to offer this further clarity to investors and fund providers.”

Under the new categorisations, the underlying investment portfolio and risk exposures of a fund constitute the primary determinant for category selection, with funds further organised by region, asset class, and specific types of strategies. For example, Debt Arbitrage funds, Global Macro funds, Market Neutral funds, and Volatility funds, among other types, are now in separate categories. The new categories align Morningstar’s alternative classifications across Europe and Asia, as well as across Morningstar’s hedge fund and open-end fund databases, making it easier for investors to research funds across these universes. The new categories cover more than 3,000 UCITS share classes and are:

Alt – Debt Arbitrage
Alt – Diversified Arbitrage
Alt – Event Driven
Alt – Currency
Alt – Fund of Hedge Funds - Equity
Alt – Fund of Hedge Funds – Multi-strategy
Alt – Fund of Hedge Funds - Other
Alt – Global Macro
Alt – Long/Short Debt
Alt – Long/Short Equity - Emerging Markets
Alt – Long/Short Equity - Europe
Alt – Long/Short Equity - Global
Alt – Long/Short Equity - UK
Alt – Long/Short Equity - US
Alt – Market Neutral - Equity
Alt – Multi-strategy
Alt – Systematic Futures
Alt – Volatility

Morningstar is incorporating the new alternative category assignments into its products including Morningstar DirectTM, the company’s web-based global research platform for institutional investors, Morningstar® Adviser WorkstationTM, a comprehensive suite of adviser practice management tools, and, the company’s investment information website for individual investors.

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