Question: I usually stick with funds that have good Morningstar Analyst Ratings. Is there an easy way to search among funds only within this group?
Answer: Since its debut in late 2011, the Morningstar Analyst Rating for Funds has been helping investors identify some of the best funds on the market. Unlike a fund's Morningstar Rating, also called its star rating, which reflects the fund's past risk-adjusted performance relative to peers, the Analyst Rating is a forward-looking measure. Morningstar fund analysts rate funds based on the following five variables, or pillars: process, performance, people, parent and price. Christopher Davis, Morningstar Canada's director of fund analysis, explains these pillars here.
We call funds that earn a Gold, Silver or Bronze Analyst Rating medalist funds. Just like in the Olympics, funds earning these medals are considered among the best of their types, and our analysts expect them to outperform their peers on a risk-adjusted basis during a full market cycle, or a minimum of five years.
Although our Fund Lookup tool allows users to screen all funds by rating--including those with Neutral, Negative or no Analyst Rating--those who only want to look at medalist funds have another option.
The Fund Finder screening tool, which you can access on the Morningstar.ca Home page or Funds tab, or by clicking here lets you produce a list made up only of medalist funds among open-end funds, segregated funds or F-class funds, simply by clicking on the instant screening buttons at the top of the tool. This is a good way to get an overview of how many medalist funds there are, how spread out they are among categories, and other general information.
Drilling down
If you want to narrow down your search to funds within specific categories, or see how many medalists your favourite fund company has in its line-up, you can set those criteria by using the drop-down lists in the Fund Finder tool. Make sure you check the Gold, Silver and/or Bronze boxes under Morningstar Analyst Rating. You can even limit your search to funds with above-average Morningstar Ratings of four or five stars, or those with below-average risk (the Morningstar Risk measure is explained in this article).
As you add different filtering options, the number of funds matching the combined criteria is shown in the top right corner of the screening tool. So if your search doesn't yield many suitable choices at first, you can adjust your criteria accordingly.
Once you are satisfied with your selection criteria, click on the Search button. As an example, let's say you were looking for Gold- or Silver-rated open-ended funds in the Canadian Equity category, with Morningstar ratings of at least 4 stars. You would (in any order) check the Silver and Gold boxes under Morningstar Analyst Rating, check the 4-star and 5-star boxes under Morningstar Rating, select "Canadian Open-End Funds" from the Fund Universe menu and select the Canadian Equity category.
The results: Five funds that meet these criteria (but bear in mind that the tool does not tell you if a fund is open to new investors, so you will have to click on a fund's name to find out its status).
The resulting funds are presented in a table that lets you glean a lot more information on them. The six tabs along the top of the table let you scan data points grouped by areas of interest, including short-term and long-term performance, ratings and risk, portfolio style characteristics and fees. You can sort the list based on any of these data points by clicking on the column header.
By default, the funds are presented in the Snapshot tab, which lets you see each fund's management-expense ratio, year-to-date return, Morningstar Analyst Rating and Morningstar Rating (keep in mind that funds may have been assigned Analyst Ratings on different dates, so be careful when doing head-to-head comparisons). To go even deeper, you can click on the name of a fund to access its Quicktake Report; from there, Premium members can access the fund's analyst report the get the analyst's detailed assessment.
Using these Morningstar screening tools to find medalist funds is no guarantee that the funds you find will deliver blazing performance. But it can greatly improve your chances of finding ones that will outperform their peers while providing good managers, reasonable fees and other positive attributes.
Have a personal finance question you'd like answered? Send it to AskTheExpert@morningstar.com.
