Morningstar, a provider of investment research, is to extend the Morningstar Analyst Ratings to exchange-traded funds globally, allowing investors to compare investments across fund types.

The rollout is anticipated later this year and Morningstar will initially assign Morningstar Analyst Ratings to approximately 300 ETFs, of which around 100 will be domiciled in Europe, with coverage expected to expand over time.

The Morningstar Analyst Rating is a qualitative rating that signals Morningstar analysts’ conviction in a fund’s ability to outperform relevant peers, including both mutual funds and ETFs, on a risk-adjusted basis over a full market cycle.

The Morningstar Analyst Rating follows a five-tiered scale: Gold, Silver, Bronze, Neutral, and Negative, with analysts arriving at a rating through an assessment of five key pillars: process, performance, people, parent, and price.

Hortense Bioy, Morningstar’s director of European Passive Funds Research, said: “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. Assigning the qualitative Morningstar Analyst Rating to ETFs is a natural extension of our research, intended to further support investors in their due diligence efforts.”

In addition, Morningstar will remove the load, or commission/sales charge, adjustment from the Morningstar Rating, commonly known as the star rating, calculation globally. The updated Morningstar Rating methodology for funds is available here.

“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.” Ms Bioy said.

• Morningstar UK has also announced the winners of this year’s Morningstar Awards for Excellence in Investment held this week at The Dorchester Hotel.
The 2016 winners were:

• Outstanding Fund Manager: Iain Stewart, Newton Real Return
• Outstanding Rising Talent: Henry Dixon, Man GLG Undervalued Assets and Oliver Kelton, Odey European Focus (co-winners)
• Outstanding Investment House: Baillie Gifford