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Morningstar turns to ETFs in ratings expansion

Morningstar turns to ETFs in ratings expansion

Research provider Morningstar is to apply its analyst rating process to exchange-traded funds (ETFs) in a reflection of their growing popularity among investors.

The ratings, which signal Morningstar specialists’ conviction in a fund’s ability to outperform relevant peers, are expected to be introduced to ETFs later this year. They range from gold, silver and bronze to neutral and negative.

Morningstar plans to initially apply them to around 300 products, of which around 100 will be domiciled in Europe, with coverage expected to expand over time.

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Hortense Bioy, Morningstar’s director of European passive funds research, said adding ratings to ETFs was a “natural extentsion” of the firm’s work.

“With ETFs increasingly used strategically to build investment portfolios and the range of ETF options continuing to grow, investors need help to make informed decisions.

“We’ve been providing qualitative research and analyst reports on some 650 ETFs worldwide for more than eight years, and launched analyst ratings for index funds in the UK in 2013,” he said.

Morningstar also said it would remove load and commission charges from its rating calculations globally. The firm said fewer investors were paying such charges, making it unnecessary for its rating methodology.