Morningstar Will Enhance Medalist Rating Methodology for Improved Investment Insights

Morningstar, Inc. (NASDAQ:MORN), a leading provider of independent investment insights, today announced its plans to enhance the methodology of the Morningstar Medalist Rating™, its comprehensive forward-looking rating for managed investments.

The Morningstar Medalist Rating is a five-tier system designed to evaluate an investment strategy's potential to outperform a relevant index or peer group over the long term. Ratings are assigned on a scale from Gold to Negative based on an evaluation of how much value a managed investment can add compared to its assigned benchmark after fees and three pillars—People, Process, and Parent—that determine Morningstar's conviction in a particular investment strategy.

The enhancement, which will begin to take effect on Oct. 29, 2024, refines Morningstar's framework for forecasting future returns but maintains the same process for assigning ratings. Using historical data, the updated framework introduces a more precise assessment of how much value a managed investment can add before fees compared to its assigned benchmark. This is called the Alpha Potential Estimate, and it is an important input into the Medalist Rating framework. Morningstar expects the updated methodology to change the ratings for about 20% of Medalist-rated investment vehicles, most of which will be downgrades that result from a reduced Alpha Potential Estimate.

"There are a wide range of investment products available today, and Morningstar's ratings serve to guide investors toward informed decisions," said Jeff Ptak, chief ratings officer at Morningstar. "Our Medalist Rating has done a good job of sorting funds based on future performance, and this methodology enhancement is an opportunity to build on this strength to further empower investors."

Morningstar is also refining the algorithm that evaluates the Process pillar of passively managed equity vehicles that are not covered by an analyst. The updated approach will employ a rules-based system that more closely aligns with how Morningstar's Manager Research analysts evaluate the Process pillar of the ratings for these types of investments.

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About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment insights in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and solutions that serve a wide range of market participants, including individual and institutional investors in public and private capital markets, financial advisors and wealth managers, asset managers, retirement plan providers and sponsors, and issuers of fixed-income securities. Morningstar provides data and research insights on a wide range of investment offerings, including managed investment products, publicly listed companies, private capital markets, debt securities, and real-time global market data. Morningstar also offers investment management services through its investment advisory subsidiaries, with approximately $316 billion in AUMA as of June 30, 2024. The Company operates through wholly-owned subsidiaries in 32 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on X (formerly known as Twitter) @MorningstarInc.

Morningstar's Manager Research Group

Morningstar's Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar Manager Research provides independent, fundamental analysis on managed investment strategies. Morningstar views are expressed in the form of Morningstar Medalist Ratings, which are derived through research of three key pillars—People, Process, and Parent. The Morningstar Medalist Rating is the summary expression of Morningstar's forward-looking analysis of investment strategies as offered via specific vehicles using a rating scale of Gold, Silver, Bronze, Neutral, and Negative. A global research team issues detailed research reports on strategies that span vehicle, asset class, and geography. Medalist Ratings are not statements of fact, nor are they credit or risk ratings, and should not be used as the sole basis for investment decisions. A Medalist Rating is not intended to be nor is a guarantee of future performance. This press release is for informational purposes only; references to securities should not be considered an offer or solicitation to buy or sell the securities.

©2024 Morningstar, Inc. All Rights Reserved.

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