Morningstar is set to apply its forward-looking analyst ratings to around 300 exchange traded funds later this year.
The rating company says of the 300 ETFs, 100 are domiciled in Europe and it expects to expand the coverage over time.
As it does for mutual funds, the firm will award each ETF one of its five ratings based on the analysts’ convictions: Gold, Silver, Bronze, Neutral and Negative with an assessment based on five key pillars: process, performance, people, parent, and price.
For more than eight years the firm has been providing qualitative research and analyst reports on some 650 ETFs worldwide.
Morningstar director of European passive funds research Hortense Bioy says the new ratings are a “natural extension” of its research capability.
The firm is also removing the load adjustment, which includes the commission and sales charges paid by investors, from the rating.
Bioy adds: “We’ve found that fewer investors are paying commissions or sales charges, which is why we’re removing the load adjustment from the Morningstar Rating calculation.
“When we established the Morningstar Rating methodology, these charges were much more common and we saw a need to highlight the cost for investors. With this change, we’re focused on both fairly evaluating the industry’s past, as well as helping investors effectively navigate the future.”