Morningstar has begun issuing research reports and ratings on closed-end funds, with the launch of reports on 30 funds. By the end of the first quarter, Morningstar will be covering 100 closed-end funds in the U.S., representing about a quarter of the universe and focused on the largest and most heavily traded funds.
The reports will include both quantitative and qualitative analysis and break down the rationale behind Morningstar’s rating. The ratings will be based on a five-point scale ranging from elite to superior, standard, inferior and impaired and be based on five factors: the management team, investment process, parent company, performance and fees.
In addition, the reports will evaluate the fund’s portfolio holdings, investment approach, net asset value, performance, risk and return profile, discount/premium history, board of directors, fees, leverage and distributions.
“Closed-end funds are unique investment vehicles in that they offer broad diversification like mutual funds but trade on national exchanges and can use financial leverage,” said Mike Taggart, closed-end fund strategist at Morningstar. “Our new, comprehensive research reports combine Morningstar’s approach to analyzing both mutual funds and equities to evaluate the unique attributes of closed-end funds.”
The majority of investors don’t have access to third-party, independent research on closed-end funds, Taggart added.
The reports and ratings are currently available through the Morningstar Direct and Morningstar Office platforms as well as to premium subscribers at Morningstar.com.