Morningstar created the mutual fund ranking system to great acclaim. While their system has come under a great deal of scrutiny it remains the most popular system available. Now Shefali Anand in the Wall Street Journal reports that Morningstar (MORN) is adding to their fund rankings to include exchange traded funds.
Morningstar’s new service is essentially an expansion of its widely used ratings service for mutual funds. ETFs will be rated in much the same way as traditional funds, assigning one to five stars based on Morningstar’s calculation of past performance as adjusted for the riskiness of the investment.
The primary objective will be to compare ETFs with traditional mutual funds “that invest in the same territory,” says Don Phillips, managing director of the Chicago-based firm. They also can be used to compare performance of ETFs with each other. However, the overall number of ETFs being tracked is tiny, compared with the nearly 6,500 mutual funds that Morningstar tracks.
Speaking of fund ratings, Jonathan Burton at Marketwatch.com reports that Lipper is joining Morningstar in beginning to rate so-called hybrid mutual funds. Lipper plans on creating two categories of funds, long-short equity and market neutral. Yet another indication of the growing trend of hybrid funds.