Morningstar Doesn't Say What a Fund Is
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Thursday, February 06, 2014

Morningstar Doesn't Say What a Fund Is

People, get over the box thing already. Grow up.

It seems like one of the most common grouses among fundsters is whether Morningstar assigned their funds to the right categories, style boxes or the right "In" crowd, yada, yada, yada.

The inestimable John Rekenthaler tries to cut down on some of this whinging (great, great British word on, you guessed it, whining that is really annoying) in a column on what Morningstar does and does not do when it comes to assigning funds to various boxes.

Some of my favorite quotes from this excellent article are the following:

Morningstar does not say what a fund is. Morningstar assigns funds to categories. The two activities are quite different.

Whatever choice Morningstar makes,…it is not because Morningstar is confused and believes the fund to be something other than what it is. It is because the fund must go somewhere.  

Even Rekenthaler admits that sometimes a fund goes into a category, he uses the example of mid-cap blend, that is not a perfect description for that fund. But, again, the fund has to go somewhere.

Oh the humanity! The injustices committed against fundsters. The unfairness of systematized characterizations that challenge a fund's marketing efforts.

Grow up already.

How many of you fundsters use M*'s categorizations to your advantage? How many value funds investing in left-handed oven mitts have you created just to you can have a category just to yourself so you can be the top category performer no matter what you do?

Some may argue that it is unfair that Morningstar could doom a fund by placing it in the wrong box, or giving it the wrong categorization, or the wrong number of stars, what have you.

If it is, then why are you giving Morningstar so much power? Be that different lemming. Challenge them, or come up with a new way of communicating to advisors and clients that isn't so dependent on M*'s seal of approval. Be cool on your own.

Not everything is high school, people. Grow up already.

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