Investors who weren't already superstitious after suffering a year of brutal markets had good reason to believe in voodoo this month. The Morningstar Web site, which is widely used by investors to pick funds, was grossly inaccurate on, of all days, Friday the 13th.
Chicago-based Morningstar said last week that a software glitch caused the company's Web site to display incorrect data for all of the 14,000 funds that the firm reviews. The erroneous numbers were posted at Morningstar.com for less than 12 hours on Sept. 13, said spokeswoman Kathy Habiger.
Under Par
A throng of investors and other customers who use the data called to complain about the errors, Habiger said. The company's site erroneously showed that many funds had not met their benchmarks during certain years. The glitch affected the calendar-year returns for the funds, as well as data regarding load-adjusted returns and tax-adjusted returns, she said.
Habiger said she could not cite specific examples of inaccurate data. But a Reuters report said that Morningstar incorrectly said Fidelity's $60.3 billion Magellan fund had gained only 13.1% in 1999 and had not met its benchmark.
In fact, the fund rose 24.1% that year, outpacing the Standard & Poor's 500 index by 3.1%.
Asked if Morningstar was concerned that the snafu would tarnish its reputation, Habiger said, "Certainly, it is important. As soon as we became aware of the problem, we set about fixing it."
Investors who used Morningstar.com to make key investment decisions on the day of the glitch were likely affected for the worse, said Matt McGinness, an analyst at the Boston research firm Cerulli Associates.
Still, he said, the damage was likely minimal. "As far as one day is concerned, I don't think it's a terribly big deal," he said.
Froze
Before Sept. 13, Habiger said the problem had never occurred in Morningstar's 18-year history. The glitch happened when a software program that updates all of the fund data once each week froze, leaving incorrect numbers on the Web site.
"We were under the impression that the program had completed, and it hadn't," she said.
To remedy the problem, Morningstar installed two notification systems that will alert staff if the program should freeze again, she said.
The company's ubiquitous star rating system, which gives individual funds a rating of between one and five stars, was not affected, nor were other products, such as the company's Principia Pro system, which provides fund data to financial advisers.
"This situation only affected our online products," Habiger said.
