DoubleLine Total Return Bond currently has a 5-star Morningstar Rating for funds, which is a quantitative measure based on historical risk-adjusted returns. The Morningstar Rating for funds, often called the “star rating,” debuted in 1985 and was quickly embraced by investors and advisors. Using a scale of one to five stars, it allows investors to easily evaluate a fund’s past performance and introduced the concept of risk- and cost-adjusted returns to the average investor.
In 2011, we introduced the Morningstar Analyst Rating, which is a forward-looking, qualitative measure based on our analysts’ assessment of five key areas: People, Parent, Process, Performance, and Price. The Morningstar Analyst Rating is based on an extensive qualitative review of these areas and other information such as due diligence questionnaires, interviews with the fund’s manager and other key executives, and discussions with our internal ratings committee.
We originally assigned a Morningstar Analyst Rating of Neutral to DoubleLine Total Return. DoubleLine continues to decline to answer the due diligence questions that are part of our ongoing evaluation of funds under analyst coverage. Without more detail about portfolio construction and attribution, risk controls, and the composition of the team backing the fund’s manager, Morningstar has determined that the fund is Not Ratable. Our analysts do, however, continue to follow the fund and will reevaluate it periodically.
We don’t consider any of this a threat to our economic moat, or sustainable competitive advantage. We believe there are many factors that contribute to our economic moat, which is based on sources such as intangible assets and brand strength, high switching costs, and our extensive reach with individual investors, financial advisors, asset management firms, and retirement plan sponsors and providers.
Because we continuously work on strengthening these moat sources, our moat doesn’t depend on any single proprietary tool or market acceptance by any individual market participant.
Finally, if you’re interested, we’ve written a response to the Barron’s article that you reference and expect it to be published in the October 4 issue.