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Morningstar Upgrades 13 Funds, Downgrades 2

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Morningstar says it has just changed the ratings of 15 funds on its “medalists” list, upgrading 13 and taking two down a notch. The Chicago-based research firm also issued new ratings on four funds.

The group changes its ratings when its analysts become convinced that a fund’s long-term ability to outperform its peer group and/or the relevant benchmark, on a risk-adjusted basis, has shifted. It works with a five-tier scale, which has three positive levels — gold, silver and bronze — and neutral and negative ratings.

(Morningstar began using this ratings system, based on forward-looking expectations, for mutual funds in November 2011. Star ratings from one to five are used to measure past performance.)

Ratings Game

As of Aug. 30, 157 U.S. mutual funds had a gold Morningstar rating, 289 funds had a silver rating, 331 funds were rated bronze, 336 funds had a neutral rating, and 40 funds were rated negative.

Only 10% percent of mutual funds available for sale in the United States are currently Morningstar medalists, the research firm says.


Morningstar upgraded The Principal’s LifeTime target-date funds to bronze from neutral.

This includes funds with target dates of 2010, 2015, 2020, 2015, 2030, 2035, 2040, 2045, 2050, 2055 and 2060.

The Principal LifeTime Funds have investment mixes that become more conservative over time; the asset allocation is regularly readjusted within a time frame that extends 10-15 years beyond the target date, at which point it reaches its most conservative allocation, according to the company.

Principal’s LifeTime Strategic Fund was also upgraded to bronze from neutral, as was the TIAA-CREF Growth and Income Fund.


Morningstar downgraded the Arden Alternative Strategies Fund to neutral from bronze.

The research group also took the Ivy High Income Fund down a notch. It was downgraded to negative from under review; prior to being put in the “under review” category, the fund’s rating was neutral.

New Ratings

Several U.S. mutual funds received their first Morningstar ratings in August:

• 361 Managed Futures Strategy—neutral;

• Equinox Campbell Strategy—neutral;

• Thornburg Limited-Term Muni—bronze; and

• Vanguard Market Neutral—bronze. 

Morningstar notes that its research team covers about $8 trillion of U.S. investor assets, or about 70% of total investor assets in the United States.

It says that the ratings indicate the level of analysts’ conviction in a fund’s future performance, which is evaluated in reference to five pillars: people, process, parent, performance and price.

Check out 3 Investments Retirees Should Avoid: Morningstar’s Benz on ThinkAdvisor.


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