Getting a C on your overall grade? If this happened in your freshman-year Sociology class you'd be freaking out now. But, if you are Principal Financial Group and are given an overall rating C for your Morningstar Stewardship Grade
, you can relax a little.
In the Morningstar
ratings universe, getting a C on overall performance is really not that terrible. The Morningstar Stewardship Grade methodology considers four components when grading firms, including corporate culture, manager incentives, fees, regulatory history, and board quality (U.S. fund firms only).
Sneaking into the top 20 fund family rankings for assets, the 100-plus-years-old firm has expanded boldly in the past decade. It has bought some quality investment shops, seen some good performance and kept its nose clean with regulators. It has also grown more open to using subadvisors. Its days of being solely an insurance-retirement business are clearly over.
So what does it mean if you get a C for your Morningstar Stewardship Grade? According to Morningstar's revised methodology
(in use since 2011), firms with standard cooperate cultures, 40 percent to 59 percent of assets in funds with manager investment exceeding $1 million, average fee rank percentiles from 41 to 60, no history in regulatory violations, standard fund boards governance, get a C.
According to the 2011 Mutual Fund Stewardship Grade Research Paper
the most common grade among all funds is C. In that paper, 455 out of 1051 funds received a C, or about 43 percent.
With all these being said, receiving a C really just means that Principal fund is not a standout, but there is nothing that investors should be extremely worried about. Maybe it's time for investors to learn to be a little less judgmental.
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