Morningstar Enhancing Coverage of Collective Investment Trusts
CHICAGO, IL, November 29, 2006 -- Morningstar, Inc. (NASDAQ: MORN) today announced plans to enhance its coverage of collective investment trusts, investment vehicles similar to mutual funds available only in qualified retirement plans, such as 401(k) plans. Beginning in early 2007, Morningstar will collect net returns, in addition to gross returns, for these pooled investment vehicles, and will provide monthly rankings and Morningstar Ratings™ against a peer group of mutual funds. Morningstar currently compares collective investment trusts to separately managed accounts, using gross returns to provide a quarterly rating. Under this new framework, investors and advisors will be able to more accurately compare collective investment trusts to mutual fund offerings in retirement plans and will have access to timelier, more transparent information.
"Standard industry practice has been to treat collective investment trusts as ‘separate accounts,’ using gross returns and not to request monthly data from providers. Because these investments are direct competitors with mutual funds in retirement plans, however, we think it’s more appropriate to give them more prominence and put them on a level playing field with mutual funds," said John Rekenthaler, vice president of research for Morningstar. "We are significantly upgrading the quality of our collective investment trust coverage. Going forward, investors will be able to directly compare the star ratings of a collective investment trust with those of a mutual fund. We hope not only to provide a more timely, meaningful point of comparison for investors, but also to set a higher reporting standard within the collective investment trust space."
With its recent acquisition of the database division of InvestorForce, Morningstar now has data on approximately 650 collective investment trusts. In addition to both gross- and net-of-fee performance data, Morningstar collects other data points such as risk and return statistics, fees and expenses, manager information, and portfolio holdings. Collective investment trust data is currently available in Morningstar DirectSM the company’s Web-based research platform for institutions, as well as Morningstar® Principia® and Morningstar® Advisor WorkstationSM, products for financial advisors.
The Morningstar Rating™ for funds, often called the “star rating,” was introduced in 1985 and rates mutual funds from one to five stars based on how well they’ve performed (after adjusting for risk and accounting for all expenses) compared with funds that share the same investment style and focus. The new collective investment trust rating will employ the same methodology, ranking them against their comparable mutual fund peer group based on risk-adjusted net returns. To be eligible for a rating, collective investment trusts must provide three years of monthly net returns in addition to portfolio holdings.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in the United States and in major international markets. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 145,000 investment offerings, including stocks, mutual funds, and similar vehicles. The company has operations in 14 countries and ownership interests in companies in three other countries.
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