Morningstar announced Monday it will unveil 11 new mutual fund categories as part of a series of upgrades to the companys investment methodology.
The Chicago-based fund-tracking firm also plans to discontinue one category and change the names and content of eight others. The new categories include Conservative Allocation, Moderate Allocation, Bear Market, Bank Loan, High-yield Municipal Bond and State-specific Municipal Bond.
The current single-state categories will be consolidated and renamed to include both intermediate and short duration single-state funds. For example, the Muni New York Intermediate and Intermediate/Short funds will merge to become the Muni New York fund.
The Domestic Hybrid category, formerly made up of funds that had between 20% and 70% of assets in stocks and at least 10% in bonds, will be split into two new categories: Conservative Allocation and Moderate Allocation. Two categories will be renamed for consistency purposes, the company said. The International Hybrid and International Bond funds will be renamed World Allocation and World Bond, respectively.
The company said these category changes would reflect more accurately a funds long-term investment style. In the past, a number of funds were put in the same category based on a few similarities when, in fact, they had very different investment styles. The overhaul will help investors better differentiate between the many types of funds that are now available, the company said.
"Our analyst team recently conducted a thorough study of our existing categories to determine which funds investment styles differed from their peers, and what trends were emerging in the fund marketplace," said Don Phillips, managing director at Morningstar.
"As a result of those studies, weve fine-tuned the categories to ensure they reflect the current investing climate."