MutualFundWire.com: M* Sheds More Light on Ratings

MutualFundWire.com

The insiders' edge for 40 Act industry executives!
an InvestmentWires' Publication

Wednesday, March 13, 2013

M* Sheds More Light on Ratings

Changes in portfolio managers usually raise alarums with investors, but Morningstar analyst Janet Yang writes that fund personnel change isn't necessarily a bad thing.

Yang explains that Morningstar analysts have no formal watch-list per se, "but we often put the Analyst Ratings of funds that have changed skippers under review. After further due diligence, we sometimes find the change is an improvement."

She notes a couple of scenarios where such a change can actually be a good thing, for example:

One Fund's Pain Is Another's Gain
"A manager's departure may justify a fund's downgrade, but that manager's appearance at a different fund may be a positive development there."
Keeping Things Fresh
"Regular changes to the series' team members can help keep viewpoints fresh--perhaps a nontrivial feature given that the series' asset-allocation guidelines have so much room for interpretation. The newer members have already left their imprint on the firm's recently launched Portfolio Series funds"
Addition by Subtraction
"Sometimes less is more, such as when a fund's top-heavy investment team sheds some of its members. As these examples show, fund personnel changes aren't necessarily negative, though they should prompt investors to dig deeper."