Investors familiar with Morningstar's 5-star system for rating mutual funds will soon see ratings based on an "AAA" scale as well.
Morningstar on Thursday announced plans to assign "Analyst Ratings" to supplement star ratings beginning in October. It's an addition to give investors a sense of a fund's prospects, rather than just its past performance.
Star ratings are based on quantitative measures of a fund's past results. The analyst ratings will assess qualitative factors. Those include judgments by Morningstar analysts of the strengths of a fund's managers and parent company.
The ratings will use a five-level scale. Top-rung "AAA" funds are those Morningstar believes are in the best position to deliver strong returns. Further down the scale are ratings of "AA" and "A," as well as "Neutral" and "Negative."