To better classify alternative investments, Morningstar has added 10 new alternative investment categories within the Morningstar Category classification system, the Chicago-based investment research firm announced Monday.
Eight of the categories cover exchange traded funds and two cover the broad universe of funds, including U.S. open-end mutual funds, ETFs, variable annuity subaccounts, separate accounts, collective investment trusts and insurance group separate accounts.
The company has also renamed the Long/Short category as Long/Short Equity, and has relocated long/short funds without a predominant equity exposure to the most appropriate new alternative categories.
“We’re adding these new categories because of the growing number and heightened usage of alternative funds,” said John Rekenthaler, vice president of research for Morningstar, in a statement. “It’s clear that alternative funds are here to stay.”
More than 400 alternative mutual funds and ETFs have launched in the last five years, including more than 100 last year, according to Rekenthaler. Investors poured almost $38 billion into these funds in 2010, he said.
The new category assignments are currently available in Morningstar’s Web-based products, and Morningstar expects to roll them out in all Morningstar products in the second quarter. Morningstar has calculated historical averages for the new categories as well as recalculated historical averages for categories with reassigned funds.