Morningstar has raised the bar for the stewardship grades it has been giving to mutual fund companies since 2004 for sound corporate practices, namely: regulatory history, fees, fund manager incentives, board governance quality and corporate culture. Morningstar said it will now change underlying criteria for four of the above areas, leaving fund manager incentives alone. Specifically, Morningstar said it will pay closer attention to corporate culture, increasing it from 20% of the grade to 40%, as well as independent boards. In addition, Morningstar said, firms with poor regulatory histories will lose points.
“The stewardship grades have been a catalyst for positive change in the fund industry, and we’re committed to continuing to shine a light on the industry’s best and worst practices so investors can make more meaningful decisions about where to invest,” said Laura Pavlenko Lutton, senior mutual fund analyst and head of the stewardship grade committee.
“We’re constantly evaluating our methodologies and felt it was a good time to revisit the grades and better recognize firms that do more than just obey the law and follow industry norms,” she added.