Morningstar recently announced that it will double its Analyst Rating coverage of model portfolios by the end of 2021. The company’s manager research team currently covers 43 model portfolio series to provide ratings on more than 250 models, spanning 24 asset managers.
It defines “models” as portfolio blueprints that asset managers or investment strategists offer to financial advisors, who implement them in various ways, such as following paper versions of the model or using third-party platforms to handle the execution.
Not included are models that large wealth management firms offer exclusively through their advisors and turnkey asset-management programs because they typically are not public. It also excludes robo-advisors that mostly target retail investors, not financial advisors.
The Analyst Rating is a forward-looking, qualitative assessment of a strategy’s merits. Strategies expected to outperform their Morningstar Category Index over a market cycle earn Gold, Silver or Bronze ratings, while those expected to lag get rated Neutral or Negative.
The ratings are based on what Morningstar calls “scoring pillars,” analysts’ fundamental evaluation of the people, process and parent of each model portfolio. Fees, including the asset-weighted expenses of the underlying funds and any additional fees, such as those charged by strategists, also play an important role in the ratings.
See the panel for Morningstar’s 15 highest-rated model portfolio series as of August 2021.
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