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I still don't look much at the analyst ratings. There are some really strange comments in the people and parent pillars for some funds we have used almost as core holdings. When I read these, it often elicits a response from me of "Where did they come up with this?" And then the combination of the pillar ratings is not equally applied from fund to fund. The analyst will have a terrific review, the fund gets 5 stars, but receives a bronze rating at best. Just as we do not use M* star ratings in our screens, we will avoid using their analyst ratings, too. It does not take a genius to spot a stinker of a fund.
Reply to @BobC: Star ratings are purely quantative based on backwards looking data. Analyst rating has nothing got to do with star rating. On the other hand, Neutral/Bronze/Silver/Gold etc. are purely analyst driven based on their future expectations.
I've never given analyst ratings much wait. I can personally analyze the funds as much as they do.
Reply to @Investor: I agree that star ratings are completely quantitative. This is subject to the qualification that BobC always points out - they're dependent on the classification of each fund. While the category definitions are applied mechanically - I think - the selection of definitions is subjective. For example, why have a "nontraditional bond" category, and how is it defined (other than "whatever isn't in another bond category")?
On the other hand, the analyst ratings are not completely divorced from the star ratings. The analysts may draw subjective conclusions, but they're based as much on objective facts (that lead directly to the star ratings) as on subjective touchy-feely things. For example, M* writes that in making analyst ratings "we look at performance on a risk-adjusted basis". To my ears (or eyes, I guess), that sounds exactly like their definition of star ratings. http://news.morningstar.com/articlenet/article.aspx?id=557074
Comments
I've never given analyst ratings much wait. I can personally analyze the funds as much as they do.
I agree that star ratings are completely quantitative. This is subject to the qualification that BobC always points out - they're dependent on the classification of each fund. While the category definitions are applied mechanically - I think - the selection of definitions is subjective. For example, why have a "nontraditional bond" category, and how is it defined (other than "whatever isn't in another bond category")?
On the other hand, the analyst ratings are not completely divorced from the star ratings. The analysts may draw subjective conclusions, but they're based as much on objective facts (that lead directly to the star ratings) as on subjective touchy-feely things. For example, M* writes that in making analyst ratings "we look at performance on a risk-adjusted basis". To my ears (or eyes, I guess), that sounds exactly like their definition of star ratings. http://news.morningstar.com/articlenet/article.aspx?id=557074