Morningstar - Q3 2022 - S1

A supplement to Morningstar magazine
The magazine of independent research for the world's financial professionals
Q3 2022
Morningstar
Medalists:
The U.S. List
The Morningstar Analyst Rating for funds is a
forward-looking, qualitative rating that Morningstar's
manager research analysts assign based on their
assessment of investment merits.
For actively managed strategies, a rating of Gold,
Silver, or Bronze indicates that Morningstar's
analysts expect the investment vehicle to produce
positive alpha relative to its Morningstar
Category index over the long term. Passive medalists
are expected to deliver alpha relative to their
Morningstar Category index that is above the lesser
of the category median or zero over the long
term. Vehicles that do not meet these expectations
are rated Neutral or Negative.
An analysis of the historical dispersion of returns
leads to an alpha estimate, before fees, for a
particular category. Morningstar's analysts adjust
that up or down for a strategy based on their
view of three key pillars: People, Process, and Parent.
People and Process are heavily and equally
weighted for active strategies, while Process has
primacy for passive strategies.
Price is then accounted for directly: Expenses are
subtracted from the estimate of how much a
strategy can add before fees to arrive at a separate
overall Analyst Rating for each individual share class
or vehicle. Thus, costlier share classes get lower
ratings in some situations.
As of June 30, 2022, 1,049 U.S.-domiciled open-end
mutual funds had at least one Morningstar
Medalist share class. The following list includes
the highest-rated share class for each fund;
if more than one share class earned the rating, the
largest share class made the list. The 187
exchange-traded funds that earned Morningstar
Medalist ratings as of the end of June are listed
in the ETF section that starts on Page 26.
Œ * ´
These are our top recommendations within their
Morningstar Categories. Our evaluation of
their key pillars in the context of the fees charged
at the share class level ranks them in the top
15% of vehicles with positive net-of-fee alpha
(for active strategies) or the top 15% of classes
with positive net-of-fee alpha relative to
the category median (for passive strategies).
These are also among our strongest investment
ideas. Our evaluation of their key pillars in the
context of the fees charged at the share class level
ranks them in the next 35% of all vehicles with
expected positive net-of-fee alpha in their
category (for active strategies) or the next 35% of
classes with positive net-of-fee alpha relative
to the category median (for passive strategies).
We expect these investments to deliver positive
net-of-fee alpha. Our evaluation of their key pillars
in the context of the fees charged at the share class
level ranks them in the bottom 50% of all vehicles
with expected positive net-of-fee alpha in their
category (for active strategies) or the bottom 50% of
classes with positive net-of-fee alpha relative
to the category median (for passive strategies).
Morningstar - Q3 2022

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