Morningstar to Unite Two Forward-Looking Rating Systems into One: The Morningstar Medalist Rating

August 31, 2022

The change will combine the Morningstar Analyst Rating with the Morningstar Quantitative Rating, making it even simpler for investors to research and select best-in-class managed investments

CHICAGO, Aug. 31, 2022 /PRNewswire/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today announced plans to unite its two forward-looking managed investment ratings—the Morningstar Analyst Rating™ (Analyst Rating) and the Morningstar Quantitative Rating™ for funds (Quantitative Rating)—into a single rating: The Morningstar Medalist Rating™ (Medalist Rating). This change is slated to take place in the second quarter of 2023.

"Over the last decade, the Morningstar Analyst Rating and Morningstar Quantitative Rating have empowered investor success by accurately sorting funds based on future performance relative to a benchmark or its peers. By combining these two ratings, we are building on that strength while also simplifying the way we present information to investors," said Lee Davidson, head of manager and quantitative research at Morningstar. "This should make it easier for investors to analyze, select, and monitor managed investments amid an ever-expanding sea of choices."

Currently, Morningstar conducts forward-looking assessments of managed investments in two ways: Manager research analysts qualitatively assess managed investments they cover, with those assessments culminating in the Analyst Rating, which takes the form of Gold, Silver, Bronze, Neutral and Negative. Morningstar uses algorithmic techniques to assess managed investments that analysts do not cover. Those quantitative assessments underpin the Quantitative Rating, which takes the form of Gold^Q, Silver^Q, Bronze^Q, Neutral^Q, and Negative^Q.

By uniting the Analyst Rating and Quantitative Rating under the Medalist Rating banner, Morningstar will move to a common ratings scale of Gold, Silver, Bronze, Neutral and Negative, removing the superscript "Q" designation from the ratings of managed investments assessed quantitatively.

An example of how the Morningstar Medalist Ratings will present in a screener tool within Morningstar products. Investors will be able to easily see which pillars (People, Process, and Parent) derive from analysts and which are assigned quantitatively.

The Analyst Rating and Quantitative Rating methodologies will not change and the three pillars—People, Process, and Parent—will continue to form the basis for the ratings. However, to help investors distinguish between pillars assessed by analysts and those assessed quantitatively, Morningstar will continue to apply the superscript "Q" designation to pillar ratings assigned quantitatively.

Morningstar does not expect any impact to the ratings it assigns to managed investments as a result of this change.

"The united ratings system not only reflects our confidence in the efficacy and quality of the two rating systems, but also, better reflects how the Quantitative Rating and Analyst Rating have been joined at the hip," said Davidson. "We designed the Quantitative Rating to mimic the way manager research analysts assign ratings. Put another way, we can't generate the Quantitative Rating without the analysts' ongoing input."

By the end of the second quarter of 2023, Morningstar Medalist Ratings will be available in all Morningstar products and platforms globally that currently carry the Morningstar Analyst Rating and the Morningstar Quantitative Rating. This includes Morningstar.com, Morningstar Direct^SM, Morningstar^® Advisor Workstation^SM, Morningstar Office^SM, data feeds, as well as other products and platforms such as Analyst^® Research Center^SM.

A publicly available Frequently Asked Questions is available here.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The Company offers an extensive line of products and services for individual investors, financial advisors, asset managers and owners, retirement plan providers and sponsors, and institutional investors in the debt and private capital markets. 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 $253 billion in assets under advisement and management as of June 30, 2022. The Company has operations in 29 countries. For more information, visit www.morningstar.com/company. Follow Morningstar on Twitter @MorningstarInc.

Morningstar's Manager Research Group consists of various wholly owned subsidiaries of Morningstar, Inc. including, but not limited to, Morningstar Research Services LLC. Morningstar's Manager Research Group produces various ratings and assessments including the Morningstar Analyst Rating and the Morningstar Quantitative Rating. The Morningstar Analyst Rating is derived from a qualitative assessment process performed by a manager research analyst, whereas the Morningstar Quantitative Rating uses a machine-learning model based on the decision-making processes of Morningstar's analysts, their past ratings decisions, and the data used to support those decisions. In both cases, the ratings are forward-looking assessments and include assumptions of future events, which may or may not occur or may differ significantly from what was assumed. The Morningstar Analyst Ratings and Morningstar Quantitative Ratings are statements of opinions, subject to change, are not to be considered as guarantees, and should not be used as the sole basis for investment decisions. 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.

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