Morgan Stanley by the end of the year will begin rating 30 index-linked exchange-traded funds out of a total of 119 such funds. The tracked batch will include 25 U.S. equity index funds and five international indexes. The domestic funds will include eight broad market funds; 10 sector funds; six style, growth and value funds; and one industry fund.

Paul Mazzilli, director of Morgan Stanley's ETF research team, said the selected ETFs are the larger, more liquid funds with more than $75 million in assets that have traded for more than one year.

Mazzilli said the research team would tend to give an "equal weight" rating to the broader market funds and discuss issues involving tax efficiency and fund structure. The funds with a more narrow scope, he said, present a much greater opportunity for research and new information. A few "underweight" examples include iShares DJ US Telecom Sector Fund, iShares DJ US Consumer non-Cyclical Sector Fund and Financial Select Sector SPDR Fund.

The firm currently rates S&P Mid Cap 400 Depositary Receipts and iShares S&P Small Cap 600 Index Fund as a favorable "overweight."

The Nasdaq-100 Index fund, however, is not faring so well under Morgan Stanley's rating system. Mazzilli's team has branded it an "underweight."

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