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October 2007
Release Notes |
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Recap of Previous
Announcements |
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Morningstar
News |
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Release Notes |
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(Data Release Notes will now be sent during the first week of the month.) |
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Licensed Data Release Schedule |
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Please watch this spot in the future for a Licensed Data Release Schedule for Data Feeds and Morningstar Essentials�. Developed in response to client feedback, this schedule will be updated on a monthly basis and included with this newsletter. It provides you with basic information about scheduled changes, upgrades, and enhancements and also lists some of the changes that we are working on for the future which have not yet been scheduled. If you have any questions about specific items on the Release Schedule or would like to provide feedback on its format or content, please contact your Relationship Manager.
Licensed Data Release Schedule |
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U.S. Open-end Enhanced Category Averages |
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Morningstar is enhancing its methodology for calculating calendar-year Morningstar category averages for mutual funds to adjust for obsolete funds and funds that have changed categories. These changes will affect aggregate calendar-year category averages and may also affect individual funds� percentile rankings within their categories. By including obsolete funds in the population when calculating calendar-year category averages, Morningstar�s data will better reflect the reality of a category�s historical returns. In making this adjustment, Morningstar is addressing the problems associated with survivorship bias--the tendency for companies or mutual funds to be excluded from a database because they no longer exist.
Morningstar�s calendar-year category average data will also adjust for category changes, to better reflect the performance of funds in a category in a given calendar year. The aggregate average returns for a category in a given calendar year will now include all the funds that were in the category during that year�not just those that are in that category at year-end.
Finally, individual funds� calendar-year percentile rankings will reflect any historical category changes. When the character of a fund's holdings changes over a sustained period of time, Morningstar reassigns the fund to a category to better reflect its portfolio positioning over the previous three years. The fund�s ranking will now be measured against the category in which the fund was placed for the calendar year.
These new calendar-year category averages and percentile ranks in category will be available to Morningstar Licensed Data users in the December delivery with November month-end data. Morningstar Direct clients should check the Announcements area for details. All other Morningstar products will reflect the revised methodology in October.
Our Research team is currently evaluating the effects of obsolete funds, category changes, and recently incepted funds on category average returns. We will keep you updated on our research and future plans for making more survivorship bias free data available. |
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Municipal Bond Sector Enhancements |
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On Dec. 1, Morningstar will be enhancing our Municipal Bond Sectors to more accurately reflect classification of collateral backing and use of proceeds for a portfolio�s bond holdings. The new classification system expands the number of Super Sectors from 11 to 12, while also supporting a more granular level of 23 Primary Sectors and 43 Secondary Sectors, enabling investors to quickly evaluate the similarities and differences of funds. The new Super Sectors will be:
General Obligation
Advance Refunded
State Appropriated Tobacco
Non-state Appropriated Tobacco
Education
Wealth
Housing
Industrial
Transportation
Utilities
Water/Sewer
Misc. Revenue
Municipal Bond Sector Fact Sheet |
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Group Variable Annuity Subaccount Star Rating Enhancement |
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Beginning in October, Morningstar will compare group variable annuities to open-end mutual funds when calculating Morningstar Ratings for funds. Previously, group annuities were compared to individual variable annuities, which tend to be structured differently than group annuities from a benefit and cost standpoint. This change will give advisors, investors, and plan sponsors a uniform rating system across the investments that are most commonly used in employer sponsored qualified plans. Morningstar will debut the new group annuity ratings and rankings in the October 2007 release of Morningstar� Principia�, its CD-based investment research and planning software. The new ratings will appear in other offerings in early 2008.
Group Variable Annuity Press Release |
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Revised Morningstar Category Classification for Hedge Funds |
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Morningstar has revised our methodology for hedge fund categories. Previously, category assignments were based on a review of the hedge fund�s memorandum document, manager-provided investment strategy descriptions and supporting data, and conversations with portfolio managers. Going forward, our editorial staff will adjust the assignment process to include cluster analysis and portfolio statistics acquired via surveys as additional factors to determine the appropriate category assignment. Morningstar supports 17 hedge fund categories, which map into five broad category groupings (Equity, Arbitrage, Global, Event, and Multi-Strategy).
Hedge Fund Category Methodology Document |
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Recap of Previous Announcements |
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August 2007 Month-End Implementation of Enhanced Portfolio Statistics |
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August 2007 Month-End Implementation of Enhanced Portfolio Statistics As previously announced, Morningstar is modifying our portfolio statistics to incorporate the economic impact of short positions and derivatives. This impacts all global portfolios and all types of investment products. Our Consulting group and Licensed Data Feeds will deliver the new data in September. Morningstar Direct, Morningstar.com, and our Advisor Workstation and Principia will roll out the new data over the next quarter. Following are links to resources for this project:
Fact Sheet
Portfolio Reporting Template
Methodology Document
Data Point Inventory
Fact Sheet on Derivatives |
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New Morningstar Indexes |
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Morningstar launched a family of 15 investor-friendly fixed income indexes in July 2007. The indexes cover the core fixed income categories of U.S. Treasury corporate bonds, and mortgages. In addition to serving as tools for portfolio benchmarking and performance measurement, the Morningstar Indexes can be licensed to institutions for the creation of investment vehicles. For more information on Morningstar Indexes, visit http://indexes.morningstar.com |
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Morningstar to Add New Categories for Separate Accounts |
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In the U.S., there are now a sufficient number of U.S. Large Blend 130/30 separate accounts to form a new category called "Leveraged Net Long". Effective November 2007, a separate account strategy will be assigned to this category when the equity percentage in gross short positions is at least 20% and the equity percentage in net long positions is between 80% and 120%. As such, this category is not limited to 130/30 strategies, but rather will also include 120/20, 140/40, etc., strategies. In addition to the Leveraged Net Long category, we will also add a �Market Neutral� category. Please contact your account team if you have any questions. |
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Morningstar News |
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New Fund Stewardship Grades |
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On Sept. 25, Morningstar released new Stewardship Grades for more than 1,000 mutual funds. Morningstar�s analysis of stewardship, which the firm began in 2004, is designed to help investors research, identify, and compare fund managers and fund companies that do a good job�or a poor job�of aligning their interests with those of fund shareholders. Morningstar announced in June that it was enhancing its Stewardship Grades to further recognize fund companies that go above and beyond industry standards for governance.
Fund Stewardship Press Release
Fund Stewardship Methodology Document |
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Morningstar Introduces Family of Commodity Futures Indexes |
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On Sept. 17, Morningstar introduced five fully collateralized commodity futures indexes�the Morningstar Long/Short, Long/Flat, Short/Flat, Long-Only, and Short-Only Commodity Indexes. Based on a transparent, rules-based momentum methodology, the new family of indexes employs different strategic combinations of long futures, short futures, and cash (referred to as flat positions). These indexes are designed for investors seeking appropriate benchmarks for commodities and can support the creation of passive investment products that may serve as alternatives to active commodity investing.
Commodity Futures Index Press Release |
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Second Quarter Institutional Product Review |
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A collaboration between Morningstar and Casey Quirk, the Institutional Product Review provides a broad and systematic outlook on trends in the asset management industry. The reports are prepared using Morningstar's separate accounts and collective investment trust data with commentary from CQA. Each quarterly review covers asset flows, asset concentration, assets under management, product performance rankings, and historical return distributions across peer groups. Please visit our Website for ordering information. |
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Save the Date—Ibbotson 2008 Asset Allocation Conference |
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The annual Asset Allocation Conference will be held March 13-14, 2008, in Orlando, Florida. Watch this space for more information. |
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Morningstar at Industry Shows |
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| Morningstar will exhibit at the following conferences. We hope to see you there. |
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10th Annual Defined Contribution West Coast Conference Oct. 7-9 San Francisco, CA |
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Society of Professional Administrators and Record Keepers (SPARK) Nov. 4-6 Palm Beach, FL |
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Data Questions |
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Contact your account team or our data quality department:
U.S.
E-mail: dataquestions@morningstar.com
Phone: +1 312-696-6600
Fax: +1 312-696-6019
Mailing address:
Data Questions
Morningstar, Inc.
225 West Wacker Drive
Chicago, Illinois 60606
USA
Europe
E-mail: dataquestions.uk@morningstar.com
Phone: +44 20 3107 0070
Fax: +44 20 3107 0001
Mailing address:
Data Question
Morningstar Europe
1 Oliver's Yard,
55-71 City Road, London EC1Y 1HQ
United Kingdom |
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�2007 Morningstar. All rights reserved. |
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This e-mail contains privileged and confidential information and is intended only for the use of the recipient. Any dissemination, distribution, or duplication of this communication without prior written consent from Morningstar is strictly prohibited. If you received this message in error please contact the sender immediately and delete the materials from any computer. You are receiving this e-mail because you are a Morningstar Data client, or because you asked that your name be added to the distribution list. If you wish to remove yourself from our institutional client communication list, please hit reply with "unsubscribe" in the subject line. If you would like to opt-in to this e-mail list please hit reply and include your full name, title, company name and address. We will be happy to add you to the list. The newsletter is free, and we never release these e-mail addresses to third parties. If you change your mind and no longer wish to receive this e-mail, we will quickly remove your name from the distribution list. |
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