Why Morningstar Category Indexes
We state that we seek to mirror the indexes used within benchmarks of the Morningstar Categories. For us Morningstar are the foremost, leading global research firm and their thinking around portfolio construction is aligned with our own thinking.
Who are 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, retirement plan providers and sponsors, and institutional investors in the 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, and real-time global market data.
They operate within 29 countries and cover in excess of 600 000 different instruments.
How they build their benchmarks
The Morningstar Categories for funds were first established to help investors make meaningful comparisons between Investment funds, effectively allowing investors to compare “apples with apples”. Morningstar regularly reviews the category structure and the funds within each category to ensure that the system meets the needs of investors and keeps pace with market developments.
The categories are based on the following principles:
Proper Evaluation: Every rated category should form a benchmark against which a manager’s ability to add value relative to peers with similar investment exposures can be meaningfully measured.
Transparency: The rules defining each category should be clearly stated such that asset managers and investors can easily determine the rationale for a fund’s classification.
Independence: A fund’s classification is based on Morningstar’s independent analysis of its holdings, objective and performance.
Stability: With the exception of a clear change to a fund’s strategy which will be addressed at such time as the change is evident, a fund’s categorisation is based on its positioning through time with the trailing three years the default period evaluated. This enhances the stability of the classifications and is aligned with the interests of fund investors, who generally use funds as longer-term investments.