Fundsters interested in the safety and evaluation of fixed income mutual funds may want to look at a Saturday article in the Wall Street Journal. Jane Kim reports on the new Morningstar average credit rating system for bond funds. The new system, which started on September 1, places more weight than before on funds' lower-rated bond holdings.

The WSJ reports that, according to Morningstar, 43 percent of bond funds suffered a drop of one credit rating thanks to the change, and another 13 percent dropped by two. The Cavanal Hill Intermediate Bond Fund [see profile], the Federated Real Return Bond Fund [see profile], the Neuberger Berman Short Duration Bond Fund [see profile] and the TCW Short Term Bond Fund [see profile] saw their credit ratings drop the most.

Federated chief investment officer for fixed income Robert Ostrowski, Finra senior vice president Joe Price, Morningstar vice president of research John Rekenthaler and Securities Litigation & Consulting Group's Craig McCann weighed in on the change. 

Edited by: Neil Anderson, Managing Editor


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