Morningstar Awards 2012: Methodology

Know more about Morningstar Fund Awards scoring system

Morningstar Analysts 24 February, 2012 | 0:00
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The objective of the quantitatively driven Morningstar International Fund Awards program is to recognise those funds that have added the most value within the context of a relevant peer group for investors over the past year and over the longer-term.


Each fund in a relevant grouping will be scored as follows:


Return Score = 80% of total score


One year: 30% of total score, based on 1-year return percentile rank in Morningstar Category

Three- and five-year: 50% of total score, of which

40% = 3-year return percentile rank in Morningstar Category

60% = 5-year return percentile rank in Morningstar Category


Risk Score =20% of total score


Of the risk score:

40% = 3-year Morningstar Risk percentile rank in Morningstar Category

60% = 5-year Morningstar Risk percentile rank in Morningstar Category


The chart below summarized how the performance and risk scores break down into the 1, 3 and 5 year weightings.

Based on the above calculations, the 10 funds with the lowest scores in each Morningstar Awards Category will be reviewed by Morningstar’s qualitative research analysts in that market.


The analysts will then complete the following qualitative checks:


‧All institutional share classes will be removed unless readily available to retail investors.

‧Funds that are deemed inaccessible to local market investors will be excluded.

‧If an analyst has reason to believe that a fund cannot continue to outperform, he will submit his concerns to the heads of Morningstar’s European Research, and they can elect to remove the fund from consideration at their discretion.

‧Any fund that is deemed to have deviated from its stated mandate will be removed from consideration.

‧Any fund that has not outperformed its Morningstar category median in at least three of the past five calendar years will be removed from consideration unless Morningstar's qualitative analysts believe a fund has exceptional merit that the criteria fails to capture.


Only funds that are recorded in the Morningstar database as available for sale in a given market will be eligible to receive an award in that market.


In order to ensure Morningstar analysts can carry out effective qualitative checks for potential winners, only funds that have reported at least two complete portfolios to Morningstar between 1 September 2010 and 31 December 2011 are eligible for an award.


The smallest 10% of funds in each category are excluded from the awards based on the latest June end portfolio size expressed in US Dollars. In lieu of this measure, analysts may also exclude funds with less than USD10 million in assets at 30 June or the nearest date for which assets are available.


The following fund types are excluded from the universe: Insurance funds, closed-end funds. Currency-hedged share-classes of funds are also excluded.


For full methodology paper, please visit here.


More details of Morningstar Awards will be released going forward. Stay tune with our website announcement.

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