Morningstar Analyst Rating Inputs
Bright Directions earns Silver rating once again—the highest rating given to advisor-sold plans.
October 22, 2019 – Morningstar Analyst Ratings for college savings plans are back in session. Each year, we rate plans across five key pillars: Process, People, Parent, Price, and Performance. In October 2019, Morningstar assigned analyst ratings to 62 plans, which represent more than 97% of assets invested in 529 plans. Our analysts upgraded nine plans and downgraded eight. Morningstar identified 30 best-in-class plans, assigning these programs Morningstar Analyst Ratings of Gold, Silver, or Bronze. College savers invested in a medalist-rated plan have made a fine choice. These plans generally follow industry best practices, offering a combination of the following attractive features: a well-researched asset-allocation approach, a robust process for selecting underlying investments, an appropriate set of options to meet investor needs, strong oversight from the state and investment manager, and low fees. These features increase the likelihood that a plan will remain a strong pick for college savers. Gold-rated plans exemplify most or all of these attributes, while Silver- and Bronze-rated plans embody some of these qualities but have room for improvement.
Since 2012, ratings for 529 plans use the same scale as the Morningstar Analyst Rating for mutual funds. Both Analyst Rating methodologies consider the same five factors to arrive at the final rating, though the 529 ratings reflect the quality of the entire plan–not a single investment, as is the case for the fund rating. To arrive at an Analyst Rating for 529 plans, analysts consider: Process, People, Parent, Performance, Price. Morningstar rates the five Pillars: Positive, Neutral, or Negative. While these ratings can help with the selection process, they should not be the only factor considered. A Morningstar Analyst Rating for a 529 college savings plan is not a credit or risk rating. Analyst Ratings are subjective in nature and should not be used as a sole basis for investment decisions. Morningstar does not represent its Analyst Ratings to be guarantees. Please visit Morningstar.com for more information about the Analyst Ratings, as well as other Morningstar ratings and fund rankings.
Process: Did the plan hire an experienced asset allocator to design a thoughtful, well-diversified glide path for the age-based portfolios? What suite of investment options is offered?
People: What is Morningstar’s assessment of the underlying money managers’ talent, tenure, and resources?
Parent: Is the program manager a good caretaker of college savers’ capital? Is the state managing the plan professionally?
Performance: Have the plan’s options earned their keep with solid, risk-adjusted returns over relevant time periods? How is the plan expected to perform going forward?
Price: Are the investment options a good value?
Bright Directions Morningstar Pillar Ratings
Morningstar rates the five Pillars: Positive, Neutral, or Negative. While these ratings can help with the selection process, they should not be the only factor considered. A Morningstar Analyst Rating for a 529 College Savings Plan is not a credit or risk rating. Analyst Ratings are subjective in nature and should not be used as a sole basis for investment decisions. Morningstar does not represent its Analyst Ratings to be guarantees. Please visit Morningstar.com for more information about the Analyst Ratings, as well as other Morningstar ratings and fund rankings.
*The Morningstar Analyst Rating™ is not a credit or risk rating. It is a subjective evaluation performed by Morningstar’s manager research group, which consists of various Morningstar, Inc. subsidiaries (“Manager Research Group”). In the United States, that subsidiary is Morningstar Research Services LLC, which is registered with and governed by the U.S. Securities and Exchange Commission. The Manager Research Group evaluates funds based on five key pillars, which are process, performance, people, parent, and price. The Manager Research Group uses this five pillar evaluation to determine how they believe funds are likely to perform relative to a benchmark, or in the case of exchange-traded funds and index mutual funds, a relevant peer group, over the long term on a risk-adjusted basis. They consider quantitative and qualitative factors in their research, and the weight of each pillar may vary. The Analyst Rating scale is Gold, Silver, Bronze, Neutral, and Negative. A Morningstar Analyst Rating of Gold, Silver, or Bronze reflects the Manager Research Group’s conviction in a fund’s prospects for outperformance. Analyst Ratings ultimately reflect the Manager Research Group’s overall assessment, are overseen by an Analyst Rating Committee, and are continuously monitored and reevaluated at least every 14 months. For more detailed information about Morningstar’s Analyst Rating, including its methodology, please go to global.morningstar.com/managerdisclosures/.
The Morningstar Analyst Rating (i) should not be used as the sole basis in evaluating a fund, (ii) involves unknown risks and uncertainties which may cause Analyst expectations not to occur or to differ significantly from what they expected, and (iii) should not be considered an offer or solicitation to buy or sell the fund.
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