Morningstar UK, a subsidiary of Morningstar has launched qualitative research and ratings for passive funds, assigning a Morningstar Analyst Rating for 25 of the most popular index funds in the UK.
Among the rated funds, 23 funds were Morningstar Medalists, which are funds that receive a Morningstar Analyst Rating of Gold, Silver, or Bronze. Of these, nine received a Morningstar Analyst Rating of Silver and 14 were Bronze; none received a Gold rating. Two funds were rated Neutral.
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Ben Johnson, CFA, director of global passive funds research for Morningstar, said: "The popularity of index funds and exchange-traded products is on the rise, and we are putting them on a level pitch with their actively managed counterparts to help investors make better decisions. Our analysts have weighed the merits of the first 25 index funds to receive a Morningstar Analyst Rating against their actively managed peers in their Morningstar Categories and also relative to comparable index funds and exchange-traded funds. It should come as no surprise that the top-rated funds we have analysed are amongst the lowest-cost investment options."
Morningstar’s Analyst Rating for passive funds draws from the company’s global fund research methodology used by Morningstar fund analysts worldwide.
The methodology considers five key pillars — people (the manager and supporting research team), the investment process, the parent group, performance, and fees. In addition, passive funds are scrutinised for their benchmark tracking accuracy.
The rating scale mirrors that used by Morningstar analysts for their research and ratings of open-end and closed-end funds:
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By GlobalData- Gold: Best-of-breed fund that distinguishes itself across the five pillars and has garnered the analysts’ highest level of conviction;
- Silver: Fund with notable advantages across several, but perhaps not all, of the five pillars — strengths that give the analysts a high level of conviction;
- Bronze: Fund with advantages that outweigh any disadvantages across the five pillars, and sufficient level of analyst conviction to warrant a positive rating;
- Neutral: Fund that isn’t likely to deliver standout returns, but also isn’t likely to significantly underperform; and
- Negative: Fund that has at least one flaw likely to significantly hamper future performance, and is considered an inferior offering to its peers.
The initial Morningstar Analyst Ratings for index funds in the UK are:
- Fund Name / Morningstar Analyst Rating
- BlackRock Japan Equity Tkr D Acc – Bronze
- BlackRock Corporate Bond Tkr D Acc – Bronze
- BlackRock North Amer Eq Tkr D Acc – Bronze
- BlackRock Overseas Corp Bd Tkr D Acc – Bronze
- BlackRock Overseas Govt Bd Tracker D Acc – Neutral
- BlackRock Pacific Ex Japan Eq Tkr D Acc – Bronze
- BlackRock UK Equity Tracker D Acc – Bronze
- BlackRock UK Gilts All Stocks Tkr D Acc – Bronze
- HSBC American Index Retail Acc – Silver
- HSBC FTSE 100 Index Retail Acc – Neutral
- LandG All Stocks Idx Linked Gilt Idx I Acc – Bronze
- LandG Pacific Index I Inc – Silver
- LandG UK Index Trust I – Bronze
- Vanguard Emerging Market Stock Idx Inv Acc – Bronze
- Vanguard EUR Gov Bond Index Inv EUR – Silver
- Vanguard FTSE Dev Wld ex UK Eq Idx Acc – Silver
- Vanguard FTSE U.K. Equity Index Acc – Silver
- Vanguard Global Bd Idx GBP Hdg Acc – Bronze
- Vanguard Global Stock Idx Inst USD – Bronze
- Vanguard Japan Stock Idx Inst USD Acc – Silver
- Vanguard Pacific Ex-Jap Stk Idx Inst USD – Silver
- Vanguard U.K. Government Bd Idx GBP Acc – Silver
- Vanguard UK Inv Grade Bd Idx GBP – Bronze
- Vanguard US 500 Stock Index Ins USD – Silver
- Vanguard US Inv Gr Crdt Idx Inst USD – Bronze
Ratings as at 3rd December 2013.
