Morningstar Introduces Stewardship Grade(TM) for Fund Firms

Five Fund Firms Garner As; No Fund Firms Receive Fs

TORONTO, June 16 /CNW/ - Morningstar Research Inc., a Canadian subsidiary of Morningstar, Inc. (Nasdaq: MORN), today announced its new Stewardship Grade(TM) for fund firms, designed to help investors identify and compare fund companies that do a good job - or a poor job - of aligning their interests with those of fund unitholders. In its review of 27 fund companies, Morningstar identified five as the best firms in terms of stewardship with an A grade, while no fund firms received an F.

The Stewardship Grade goes beyond the usual analysis of strategy, risk, and return. It helps investors assess funds based on the manner in which funds are run; the degree to which the management company's interests are aligned with those of unitholders; and the degree to which unitholders can expect their interests to be protected from potentially conflicting interests of the management company.

"With our introduction of the Stewardship Grade for fund firms, we've tried to capture some of the intangibles associated with making an investment decision," said Scott Mackenzie, president and chief executive officer of Morningstar Canada. "The grades aren't designed to be "buy" or "sell" signals, but to help investors better understand the funds they invest in and help determine the difference between a great investment and one to avoid."

Morningstar analysts evaluate four components when assigning a score for each fund company:

    -   Corporate Culture: How seriously a firm takes its fiduciary duty to
        its fund unitholders, such as whether a fund company is focused on
        investing or gathering assets, or whether the firm fosters a
        thoughtful and repeatable investment process.
    -   Manager Incentives: Whether a firm's incentive policies effectively
        align management's interests with those of unitholders and whether
        the managers invest in the funds they run.
    -   Fees: An evaluation of a fund company's management expense
        ratios (MERs) relative to those of other firms; with some
        consideration given to the distribution model of the company
    -   Regulatory History: An examination of any regulatory issues at the
        fund company, normally focusing on the past seven years.

To arrive at a fund company's Stewardship Grade, Morningstar analysts tally points across all four components. The maximum score is 8 points. The Corporate Culture component's maximum score is 4 points; the Manager Incentives and Fees components' maximum score is 2 points; the Regulatory History component's maximum score is 0 points, and the lowest possible score is -2 points. The overall Stewardship Grade is based on the sum of the four component scores, and each fund company is assigned a letter grade from A (best) to F (worst):

A: 7.5 - 8 points

B: 5.5 - 7 points

C: 3.5 - 5 points

D: 1.5 - 3 points

F: fewer than 1.5 points

Fund company grades are updated annually, although Morningstar reserves the right to change a firm's grade at any time. The Stewardship Grades are primarily based on information compiled from public filings and the expertise of Morningstar's fund analysts. Morningstar also invites each fund company to participate in a voluntary survey to provide additional information that goes beyond regulatory disclosure requirements.

Stewardship Grades differ from the Morningstar Rating for funds (the "star" rating), which is a quantitative assessment of a fund's past performance, adjusted for risk. The Stewardship Grade uses some quantitative measures but is primarily a fund analyst's subjective assessment of a fund's commitment to unitholders' best interests.

The Stewardship Grades and accompanying analyst reports are currently available for free on, Morningstar Canada's investment information website for individual investors. Both will become part of the Premium Membership in September, along with a number of new features Morningstar announced today. For more information about the enhancements on, please refer to the press release at

For more information about the new Stewardship Grades, including the methodology, fact sheet, and questions and answers document, please visit

About Morningstar

Morningstar Research Inc. is a Canadian subsidiary of Chicago-based Morningstar, Inc., a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 350,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 20 countries and minority ownership positions in companies based in two other countries.

(C)2010 Morningstar, Inc. All rights reserved.

SOURCE Morningstar Research Inc.

For further information: For further information: Media Contact: Isabell Grygianiec, +1 416 484-7868 or

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