The Morningstar Stewardship Grade for mutual funds is designed to help investors further research, identify, and compare fund managers and fund companies to see how well they align their interests with those of fund shareholders. It goes beyond the usual analysis of strategy, risk, and return. The Stewardship Grade allows investors and advisors to assess funds based on factors that we believe influence the following:
The manner in which funds are run;
The degree to which the management company�s and fund board�s interests are aligned with fund shareholders;
The degree to which shareholders can expect their interests to be protected from potentially conflicting interests of the management company.
Morningstar analysts' evaluation of five factors determines the grade for each fund:
Regulatory Issues
Board Quality
Manager Incentives
Fees
Corporate Culture
We assign each fund a letter grade from A (best) to F (worst). Funds are graded on an absolute basis. There is no "curve".
To arrive at a fund�s Stewardship Grade, points are tallied across all five components. The maximum score is 10 points. The Corporate Culture component�s maximum score is 4 points, and points are awarded in increments as small as 1 point. For the Board Quality, Manager Incentives, and Fees components, the maximum score is 2 points, and points are awarded in increments as small as 0.5 points. For the Regulatory History component, the maximum score is 0 points, and the lowest possible score is -2 points. Regulatory History scores may be reduced in increments as small as 0.5 points.
Each component score corresponds to one of the following letter grades:
full credit
3/4 credit
1/2 credit
1/4 credit
no credit
The overall Stewardship Grade is based on the sum of the five component scores:
9�10 points
7�8.5 points
5�6.5 points
3�4.5 points
2.5 points or fewer
Note: Morningstar's Stewardship Grade for funds is entirely different from the Morningstar Rating for funds, commonly known as the star rating. There is no relationship between the two.
