Morningstar Launches Target-Date Fund Series Ratings and Research Reports
September 09 2009 - 9:33AM
PR Newswire (US)
Vanguard receives highest ratings, Oppenheimer lowest CHICAGO,
Sept. 9 /PRNewswire-FirstCall/ -- Morningstar, Inc. (NASDAQ: MORN),
a leading provider of independent investment research, today
launched ratings and in-depth research reports for 20 of the
largest target-date mutual fund series. Morningstar identified
Vanguard as the best target-date provider for investors based on
such criteria as management, fees, and performance. Oppenheimer
rated the lowest. "Target-date funds serve as the core holding for
millions of investors as they plan for retirement--often as the
only holding--and are increasingly an automatic default option
within defined contribution plans. Because they play such a pivotal
role in today's portfolios, it's critical for investors to select
or have access to a high-quality target-date fund from an
investor-focused fund family," said Laura Pavlenko Lutton,
editorial director in Morningstar's mutual fund research group.
"Our new ratings and research reports are designed to help
individual investors, financial advisors, and plan sponsors make
the best possible decisions when evaluating a series of target-date
funds." Morningstar evaluates target-date funds on five
components--People, Parent, Performance, Portfolio, and Price.
People and Parent ratings are determined by both qualitative and
quantitative measures of the funds' management processes.
Performance, Portfolio, and Price ratings use quantitative measures
to evaluate the quality of both the target-date funds and the
underlying holdings in which they invest as well as the cost that
investors must pay. Morningstar assigns one of five ratings for
each component: Top, Above Average, Average, Below Average, or
Bottom. Based on the five component ratings, each target-date fund
series earns an overall rating using the same grade scale. The
Vanguard Target Retirement target-date funds received the highest
rating from Morningstar analysts. This series employs best
practices with low fees, a high level of transparency, and prudent,
investor-oriented management. Vanguard's high-quality orientation
was an important factor in 2008, when the family's target-date
funds performed relatively well despite holding a stock allocation
similar to many of its peers. Vanguard's long-tenured managers also
bolster the funds' appeal. The lowest rating went to Oppenheimer. A
relatively aggressive asset allocation and severe problems in some
of the funds' underlying bond holdings led to very poor performance
in 2008. Investor losses were further compounded by the steep fees
associated with these funds; Oppenheimer has the highest fees among
all target-date fund families that Morningstar tracks. "Though many
target-date funds are sound investments, there's room for
improvement. Price is a key component in our rating system for
target-date series because over the many years, even decades, that
an investor may hold a target-date fund, the compounding advantage
of lower expenses can be sizable. Vanguard is currently the only
truly low-cost provider in this space, although other firms have
indicated they'll launch cheaper, indexed options too," Lutton
said. "There is also a need for better disclosure. Transparent,
easily accessible information on the rationale or research behind
fund companies' asset allocation decisions is rare. In addition,
many fund companies can make strides in providing more detailed,
timely, and useful information regarding their target-date funds'
underlying investments." Morningstar Target-Date Fund Series
Ratings and Research Reports are now available in Morningstar
Principia , and will be available in the coming months in
Morningstar Advisor Workstation(SM) Enterprise Edition, Morningstar
Office, Morningstar Site Builder(SM), and through licensed data
feeds. Morningstar.com, the company's Web site for individual
investors, publishes the ratings and a modified version of the
report. For additional information about Morningstar's target-date
fund evaluation and rating methodology, please visit
http://global.morningstar.com/TargetDateReports. About Morningstar,
Inc. Morningstar, Inc. is a leading provider of independent
investment research in North America, Europe, Australia, and Asia.
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 nearly
325,000 investment offerings, including stocks, mutual funds, and
similar vehicles, along with real-time global market data on more
than 4 million equities, indexes, futures, options, commodities,
and precious metals, in addition to foreign exchange and Treasury
markets. The company has operations in 19 countries and minority
ownership positions in companies based in three other countries.
2009 Morningstar, Inc. All rights reserved. Media Contact: Alexa
Auerbach, 312-696-6481 or MORN-R DATASOURCE: Morningstar, Inc.
CONTACT: Alexa Auerbach of Morningstar, Inc., +1-312-696-6481, Web
Site: http://www.morningstar.com/
Copyright