In the next six months, the Chicago investment research firm will roll out 11 new categories, change the name and/or definition of eight more and delete one altogether, Morningstar has just announced in a letter to its customers, The Wall Street Journal reports.
In line with the times, Morningstar is also creating new categories for two niches: "bank loan" and "bear-market" funds.
The domestic hybrid category, home mostly to balanced funds that invest in both stocks and bonds, will be deleted, and in its place, Morningstar will roll out "conservative allocation" and "moderate allocation" categories.
Funds with more than 50% in fixed-income securities and no more than 20% of their money in stocks will get the "conservative" label. Those with 50% to 70% of their assets in equities and more than 10% in fixed income will be called "moderate."
Another new category will be "high-yield muni" funds, defined as funds with at least half of their assets in municipal bonds that either are not rated or are below BBB. Overall, municipal bond fund categories will get other changes, including new state-specific categories for Florida, Pennsylvania, Massachusetts, New Jersey, Ohio and Minnesota.
Also, Morningstar is adjusting the names of two foreign-fund categories; the international hybrid and international bond categories will become "world allocation" and "world bond."
While these new categories are on track with Morningstars summer announcement that it was revising its categories to more accurately peg funds into the right categories, the final categories are slightly different from Morningstars earlier plans.
If the firm is successful, the new categories will enable portfolio managers and financial planners to construct better portfolios and investors will have a better idea of what kind of performance to expect, Morningstar Managing Director Don Phillips told MFMN in an interview.