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Timing of the Change We expect the Medalist Rating change to go into effect on Oct. 29, 2024. The exact timing of when the change will be reflected in Medalist Ratings will vary depending on how the rating is assigned, as explained further below.
Medalist Ratings Not Assigned by Analysts We expect the change to be incorporated into the Medalist Ratings of all funds not covered by an analyst on Oct. 29, 2024. These ratings are updated monthly and therefore we expect the change to be a part of the monthly production process that’s scheduled for that day.
Medalist Ratings Assigned by Analysts We expect the Medalist Rating change to be incorporated more gradually into the funds covered by analysts. For the change to be incorporated into a fund covered by an analyst, the analyst must update the rating of that fund. Analysts update these ratings about every 14 months as part of their regular coverage schedule. As such, we expect it will take around a year or so for the Medalist Rating change to be fully reflected in the ratings of funds covered by analysts.
Thanks for the update! As many here already know, Medalist Ratings Not Assigned by Analysts are not very useful. I don't think the upcoming Medalist Rating change will enhance the utility for these particular ratings. Medalist Ratings Assigned by Analysts, on the other hand, can be very good but this depends on the analyst assigned to the fund.
Edit/Add: When I mention "Medalist Ratings" here, I'm actually referring to the M* Analyst Reports. Medalist Ratings are included within the M* Analyst Reports. I conflated the two.
It used to be that computer-generated ratings were flagged by Q-symbols. Morningstar generates genuine analyst ratings for about 15-20% of the fund universe it covers. Now there is additional work as each fund class has its own analyst rating (not just the oldest class).
But earlier THIS year, Morningstar removed the Q-symbols claiming that its computer-generated ratings are now as good as the analyst-generated one, or one could say that analyst-generated ratings are just as bad as the computer-generated ones.
So now, the only indication of computer-generated rating may be from the text that may have more indecipherable gobbledygook in the computer-generated ratings.
It used to be that computer-generated ratings were flagged by Q-symbols. Morningstar generates genuine analyst ratings for about 15-20% of the fund universe it covers. Now there is additional work as each fund class has its own analyst rating (not just the oldest class).
But earlier THIS year, Morningstar removed the Q-symbols claiming that its computer-generated ratings are now as good as the analyst-generated one, or one could say that analyst-generated ratings are just as bad as the computer-generated ones.
So now, the only indication of computer-generated rating may be from the text that may have more indecipherable gobbledygook in the computer-generated ratings.
Huh. I was just on M* a few weeks ago and still saw Q-symbols for a bunch of tickers. Maybe they were the last ones to go.
I strongly disagree with how they now term their AI-based 'analysis' as "Morningstar Manager Analysis" or something like that (I forget the actual title). The takeaway is, unless you see an (allegedly) real person's name on an article or analysis, it may well be computer-generated. DYODD, caveat reader, and all that.
You learn so much here. I do look at M* medalist ratings. Taken with large grain of salt of course.. While I can tell a lot of the verbiage is computer generated (sameness of style / often redundant), I had assumed a live human reads them and assigns the final (gold, silver, neutral, negative) rating. Apparently not the case.
Ratings and past performance are helpful, but they are not the entire answer to how to invest going forward. Things like interest rates + direction, trends in global currencies, geo-politics, momentum chasing, energy / commodity prices, etc. all influence future asset direction in ways past performance can’t foretell. Back to those medalist ratings - ISTM they suffer from a similar rear-looking perspective and might not be a good indicator of where to invest now. We can all cite examples of funds that continue to defy those “negative” metals and soar higher. Laughable really.
Rearranging the mere appearance of their own sad mediocrity. It's been downhill for a decade or longer. I still use Portfolio Manager. Check it at end-of-day. But often enough, the numbers don't add up. Or percentages are incorrect...Analyses even by humans are not of much use at Morningstar.
Hi there. Thanks for discussing the upcoming enhancement to the Medalist Rating we announced this week.
Fwiw, a few thoughts:
- It's correct that we assign Medalist ratings by analysts and also by algorithm. However, what you'll find is that it's often not either/or. Rather, you can have a mix of the two in the same analysis. This is because we port the pillar ratings our analysts assign to vehicles they cover to related vehicles that *aren't* on their coverage list. We'll do so if the uncovered vehicle shares a) the same parent firm in common with vehicles analysts have assessed (in which case we port over the parent pillar rating they assigned, b) the same strategy in common with vehicles analysts have assessed (in which case we port over the people and process pillar ratings), or c) the same management team in common with vehicles analysts have assessed (in which case we port over the people pillar rating). In these circumstances, you'll see the automated text in the 'Summary' part of the analysis, with the author listed as 'Morningstar Manager Research'. But the pillar ratings and accompanying pillar text might have been assigned/written by analysts. Indeed, what you'll find is that only 27% of the Medalist Ratings not assigned by analysts (ie, not covered by an analyst) have all three of their pillars assigned by algo. - It's correct that we utilize algorithms to assign ratings in order to achieve broader coverage than would be possible through analysts alone. However, we don't do this because there are multiple share classes of funds and we need to tailor the analysis to those share classes. The pillars analysts assign apply to every share class. They drive our estimate of how much value that fund can deliver to investors before fees adjusted for risk. We deduct from that estimate the fund's fees to arrive at an estimate of how much value the particular share class can add after fees adjusted for risk. That in turn determines its Medalist Rating. Because the pillar ratings are the same across share classes, the accompanying text doesn't need to be tailored to those share classes and thus we achieve scale that way. Rather, we utilize algorithms to extend our coverages to vehicles that our analysts don't cover at all or where we can't fully port over the pillar ratings they've assigned to related vehicles they do cover. - I think someone noted that they still are seeing 'Q' superscripts in the ratings of some securities. My guess is you're referring to stocks. In that case, we continue to maintain a separate 'quantitative rating' with the superscript 'Q' so as to distinguish it from stock ratings that our analysts assign. The reason we have maintained the superscript 'Q' and continued to distinguish between the types of ratings for stocks and not funds is that the quant equity rating methodology is quite distinct from the analyst-driven approach. Moreover, the two ratings approaches aren't braided in the same way that the analyst-assigned and algo-assigned Medalist Ratings are (which I can further explain if helpful but conscious this is already a long post ). So, in any event, your eyes aren't deceiving you -- the 'Q's are gone for funds, but they're still there for stocks.
Thanks @jptak for pointing out that (i) most Morningstar Analyst ratings are now a mixture with some portions directly or indirectly contributed by analysts, and other portions computer-generated, (ii) stocks still have Q-ratings, but not funds (they were consolidated in 2023 for funds).
This thread now deals with 2 different issues - M* Style-Box changes (done by August?) AND M* Analyst Rating changes (upcoming by October). That was my mistake - I have edited the OP title.
Comments
https://www.morningstar.com/funds/why-were-enhancing-morningstar-medalist-rating
Timing of the Change
We expect the Medalist Rating change to go into effect on Oct. 29, 2024. The exact timing of when the change will be reflected in Medalist Ratings will vary depending on how the rating is assigned, as explained further below.
Medalist Ratings Not Assigned by Analysts
We expect the change to be incorporated into the Medalist Ratings of all funds not covered by an analyst on Oct. 29, 2024. These ratings are updated monthly and therefore we expect the change to be a part of the monthly production process that’s scheduled for that day.
Medalist Ratings Assigned by Analysts
We expect the Medalist Rating change to be incorporated more gradually into the funds covered by analysts. For the change to be incorporated into a fund covered by an analyst, the analyst must update the rating of that fund. Analysts update these ratings about every 14 months as part of their regular coverage schedule. As such, we expect it will take around a year or so for the Medalist Rating change to be fully reflected in the ratings of funds covered by analysts.
Thanks for the update!
As many here already know, Medalist Ratings Not Assigned by Analysts are not very useful.
I don't think the upcoming Medalist Rating change will enhance the utility for these particular ratings.
Medalist Ratings Assigned by Analysts, on the other hand, can be very good
but this depends on the analyst assigned to the fund.
Edit/Add: When I mention "Medalist Ratings" here, I'm actually referring to the M* Analyst Reports.
Medalist Ratings are included within the M* Analyst Reports. I conflated the two.
Hard pass for this wizened investor. (Not that I ever put huge faith in analyst 'ratings' by anyone.)
But earlier THIS year, Morningstar removed the Q-symbols claiming that its computer-generated ratings are now as good as the analyst-generated one, or one could say that analyst-generated ratings are just as bad as the computer-generated ones.
So now, the only indication of computer-generated rating may be from the text that may have more indecipherable gobbledygook in the computer-generated ratings.
I strongly disagree with how they now term their AI-based 'analysis' as "Morningstar Manager Analysis" or something like that (I forget the actual title). The takeaway is, unless you see an (allegedly) real person's name on an article or analysis, it may well be computer-generated. DYODD, caveat reader, and all that.
Ratings and past performance are helpful, but they are not the entire answer to how to invest going forward. Things like interest rates + direction, trends in global currencies, geo-politics, momentum chasing, energy / commodity prices, etc. all influence future asset direction in ways past performance can’t foretell. Back to those medalist ratings - ISTM they suffer from a similar rear-looking perspective and might not be a good indicator of where to invest now. We can all cite examples of funds that continue to defy those “negative” metals and soar higher. Laughable really.
Fwiw, a few thoughts:
- It's correct that we assign Medalist ratings by analysts and also by algorithm. However, what you'll find is that it's often not either/or. Rather, you can have a mix of the two in the same analysis. This is because we port the pillar ratings our analysts assign to vehicles they cover to related vehicles that *aren't* on their coverage list. We'll do so if the uncovered vehicle shares a) the same parent firm in common with vehicles analysts have assessed (in which case we port over the parent pillar rating they assigned, b) the same strategy in common with vehicles analysts have assessed (in which case we port over the people and process pillar ratings), or c) the same management team in common with vehicles analysts have assessed (in which case we port over the people pillar rating). In these circumstances, you'll see the automated text in the 'Summary' part of the analysis, with the author listed as 'Morningstar Manager Research'. But the pillar ratings and accompanying pillar text might have been assigned/written by analysts. Indeed, what you'll find is that only 27% of the Medalist Ratings not assigned by analysts (ie, not covered by an analyst) have all three of their pillars assigned by algo.
- It's correct that we utilize algorithms to assign ratings in order to achieve broader coverage than would be possible through analysts alone. However, we don't do this because there are multiple share classes of funds and we need to tailor the analysis to those share classes. The pillars analysts assign apply to every share class. They drive our estimate of how much value that fund can deliver to investors before fees adjusted for risk. We deduct from that estimate the fund's fees to arrive at an estimate of how much value the particular share class can add after fees adjusted for risk. That in turn determines its Medalist Rating. Because the pillar ratings are the same across share classes, the accompanying text doesn't need to be tailored to those share classes and thus we achieve scale that way. Rather, we utilize algorithms to extend our coverages to vehicles that our analysts don't cover at all or where we can't fully port over the pillar ratings they've assigned to related vehicles they do cover.
- I think someone noted that they still are seeing 'Q' superscripts in the ratings of some securities. My guess is you're referring to stocks. In that case, we continue to maintain a separate 'quantitative rating' with the superscript 'Q' so as to distinguish it from stock ratings that our analysts assign. The reason we have maintained the superscript 'Q' and continued to distinguish between the types of ratings for stocks and not funds is that the quant equity rating methodology is quite distinct from the analyst-driven approach. Moreover, the two ratings approaches aren't braided in the same way that the analyst-assigned and algo-assigned Medalist Ratings are (which I can further explain if helpful but conscious this is already a long post
In any event, I hope this is somewhat helpful.
Thanks again for the questions and feedback!
Kind regards,
Jeff Ptak
Morningstar Research Services
This thread now deals with 2 different issues - M* Style-Box changes (done by August?) AND M* Analyst Rating changes (upcoming by October). That was my mistake - I have edited the OP title.