We're launching analyst-driven ratings and research reports for South African unit trusts

Morningstar's Analyst Ratings are qualitative, forward-looking visual representations of the analyst team's view of a fund's potential to succeed

David O'Leary 21 November, 2012 | 10:46AM

On November 21 we announced the introduction of analyst-driven unit trust research to South Africa. While Morningstar has been conducting fund research since 1986 this marks our first foray into Africa. The launch introduces two ground-breaking tools to help South African fund investors and advisors: The Morningstar Analyst Rating and Fund Report. Both tools are designed to convey Morningstar’s expectations for a unit trust’s ability to produce future outperformance.

Morningstar Analyst Ratings are assigned globally on a five-tier scale running from Gold to Negative. The top three ratings, Gold, Silver, and Bronze – what we call Morningstar Medallists – all indicate that our analysts recommend a fund; the difference between them corresponds to differences in the level of analyst conviction in a fund’s ability to outperform its benchmark and peers through time. The Neutral and Negative ratings are assigned to funds that we lack confidence in or believe are impaired in some way.

The ratings should be interpreted as follows:

  • Recommended Ratings:
    • Gold: Best-of-breed fund that distinguishes itself across the five pillars (our ratings criteria) and has garnered the analysts' highest level of conviction;
    • Silver: Fund with notable advantages across several, but perhaps not all, of the five pillars; strengths that give the analysts a high level of conviction;
    • Bronze: Fund with advantages that outweigh any disadvantages across the five pillars, with sufficient level of analyst conviction to warrant a recommended rating;
  • Neutral: Fund that isn't likely to deliver standout returns, but also isn't likely to significantly underperform;
  • Negative: Fund with at least one flaw that is likely to significantly hamper future performance, and is considered an inferior offering to its peers.


Morningstar’s fund research is completely independent. We do not seek or accept payment from fund companies for issuing ratings or reports on funds. Morningstar was founded on the belief that investors have the right to unbiased information and analysis and we continue to hold that belief today. This gives us the freedom to speak frankly about a fund’s prospects and to spend our time analyzing those funds that investors most care about.

We are also introducing the Morningstar Fund Report. We offer the report in two formats: a condensed free version aimed at retail investors and a longer form report aimed at institutions and sophisticated advisors. The report details the research our analysts have conducted and discusses the factors that have led to the fund’s Morningstar Analyst Rating. The Fund Report also provides robust quantitative data to help investors understand a fund’s characteristics.

Morningstar’s evaluation of a fund is based on five key criteria or pillars: People, Process, Parent, Performance, and Price (see methodology document below for more information). Fund analysts use a combination of public data, proprietary data, and extensive meetings with fund managers and fund company executives to inform their research. All ratings are subject to a rigorous peer review process and require approval through Morningstar’s global ratings committee.

Morningstar rated funds are monitored constantly and our reports and ratings are updated anytime a significant development occurs that may change our thesis (e.g. a change of fund manager). However, we do strive to update reports annually whether or not any significant developments occur.

The Morningstar Analyst Rating and Global Fund Report can be found in the following Morningstar products:

  • Morningstar Direct (Institutional Fund Report)
  • Morningstar Advisor Workstation (seletively available)
  • www.morningstarsa.co.za (Retail Fund Report)


For more information (sample report, fact sheets, methodology documents, etc) please click on the Morningstar Fund Research Information Page.  

About Author David O'Leary

David O'Leary  is Director of Fund Research for Morningstar South Africa