For most of the nineties a fund was a hard sell if its distributor couldn't bragg of a four or five-star rating from Morningstar. The fund rater gained its clout by being the first fund researcher to make its data available on a retail basis. Now, the net (and venture capital funny money) is opening the door to new rivals. One, MAXfunds hopes to take the Chicago-giant's spot.

Today MAXfunds.com has unveiled its fund ratings. The new ratings (dubbed MAXratings) are offered free on the MAXFunds Website on individual profile pages for each funds. The company claims that its ratings differ from those of other fund trackers in that they are forward looking rather than being based solely on past performance.

"Navigating today's markets based on past performance is like driving down a curvy mountain road only looking out of the rear window -- every turn in the road presents a surprise," argues Jonas Max Ferris, founder and CEO of MAXfunds.com.

This gives the ratings the advantage of being able to include funds that are new in its system, according to MAXfunds. The fund tracker also claims to cover more small funds than rivals. The system places funds into three ratings: Green Light (Go), Yellow Light (Caution), and Red Light (Stop).

However, MAXfunds at this point only covers equity funds, leaving investors in fixed income, money market funds, and hybrid funds to look elsewhere.

Ferris points to the Kinetics Internet Fund as an example of the difference between his firm's ratings and others. The fund is up 664% over the last three years, yet MAXfunds, gives the fund its worst rating, a Red Light. Meanwhile, Morningstar gives the fund its vaunted five-star rating. Says Ferris, "The money has already been made in this fund."

Of course, the important question to fund companis is who is right? MAXfunds or Morningstar. Today, the Chicago-based Morningstar is still the fund rater with the muscle to redirect cash flows.

 

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