The Fund Family Score is an asset-weighted average of all of a fund company's Morningstar Ratings, also known as star ratings, within an asset class. It can help you to gauge a firm's overall ability within a specific asset class (domestic stock, international stock, municipal bond, taxable bond, or balanced). The scores range from 1.0 to 5.0. A score below 2.5 is an indication that the firm has met with little success in that asset class. A score between 2.5 and 3.5 indicates the firm is about average. A score above 3.5 indicates the firm has a fair amount of prowess. The more funds a firm manages in an asset class, the stronger a signal the Fund Family Score is about the firm's performance.
How We Do It
We want the Fund Family Score to reflect actual investors' experience, so we use an asset weighting from three years prior. We use an asset-weighted measure because Fidelity Magellan is much more telling about Fidelity's ability to manage investors' assets than a tiny fund like Fidelity Select Air Transportation.
We use asset figures from three years in the past because that better reflects the average investors' experience over the past three years. Because the best-performing funds grow the fastest, the current asset mix would tend to skew the score too much in a fund company's favor. For example, Janus Worldwide was much smaller in June 2004 than it was in June 2001 because losses and redemptions have shrunk assets significantly. However, it was Janus' flagship international fund in 2001, with a huge shareholder base, so it shouldn't be discounted.