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MainStay California Tax Free Opportunities Fund Earns Five-Star Morningstar Rating
FYI: MainStay announced today that the three year track record of the MainStay California Tax Free Opportunities Fund (MSCAX, MCOIX) has earned the Fund’s Class I shares a five-star rating from Morningstar, a leading provider of independent investment research in North America, Europe, Australia and Asia. The Fund has ranked in the 1st and 3rd percentiles, therefore beating at least 97 percent of the 115 funds in its peer group, in Morningstar's Muni California Long category in 2015 and 2014, respectively Regards, Ted http://www.businesswire.com/news/home/20160420005877/en
This is a good fund to demonstrate just how bunched together bond funds tend to be.
MCOIX (class I) with its 0.50% ER does get a 5* rating. But its sibling shares classes don't. MSCAX.lw (class A, load waived) with its 0.75% ER gets a 4* rating. MSCVX (Investor class) with its 0.83% ER gets a 2* rating.
A tiny difference in expenses (resulting in a tiny difference in returns) can make a large difference in ratings. One way of taking this is that a large difference in percentiles could represent a minscule performance difference, depending on the type of fund.
Then there is the matter of loads. Obviously if you can get MSCAX load-waived (e.g. at Schwab), that's going to be better than MSCVX, since the former has a lower ER.
But with respect to star ratings, Morningstar incorporates the front end load into the calculations. It amortizes the load over the period of interest (3, 5, or 10 years), to calculate a reduced load-adjusted return. That's why A shares will often have lower star ratings than load-waived A shares.
The longer the period, the less of an impact (per year) the load has. So if a fund has a ten year history, Morningstar calculates the load adjusted returns for all three periods, gets star ratings for all of them, and combines them into a single rating. But if a fund like this one has only a three year rating, the impact of the load is overstated.
That is because the load is amortized only over a short three year span. Consequently, the star rating may take an oversized hit from the load simply because the fund's lifetime is somewhat short.
Comments
MCOIX (class I) with its 0.50% ER does get a 5* rating. But its sibling shares classes don't.
MSCAX.lw (class A, load waived) with its 0.75% ER gets a 4* rating.
MSCVX (Investor class) with its 0.83% ER gets a 2* rating.
A tiny difference in expenses (resulting in a tiny difference in returns) can make a large difference in ratings. One way of taking this is that a large difference in percentiles could represent a minscule performance difference, depending on the type of fund.
Then there is the matter of loads. Obviously if you can get MSCAX load-waived (e.g. at Schwab), that's going to be better than MSCVX, since the former has a lower ER.
But with respect to star ratings, Morningstar incorporates the front end load into the calculations. It amortizes the load over the period of interest (3, 5, or 10 years), to calculate a reduced load-adjusted return. That's why A shares will often have lower star ratings than load-waived A shares.
The longer the period, the less of an impact (per year) the load has. So if a fund has a ten year history, Morningstar calculates the load adjusted returns for all three periods, gets star ratings for all of them, and combines them into a single rating. But if a fund like this one has only a three year rating, the impact of the load is overstated.
That is because the load is amortized only over a short three year span. Consequently, the star rating may take an oversized hit from the load simply because the fund's lifetime is somewhat short.
Just another idiosyncrasy to keep in mind.