Chicago-based investment research provider Morningstar has added two new categories, global real estate ands currencies, and one broad asset class, alternatives, to its proprietary classif
Chicago-based investment research provider Morningstar has added two new categories, global real estate ands currencies, and one broad asset class, alternatives, to its proprietary classification system for US-domiciled mutual fund portfolios.
Global real estate funds invest primarily in non-US real estate securities including debt and equity, convertible securities, and securities issued by real estate investment trusts. They may also invest in US securities, but at least 40 percent of the fund’s holdings must be non-US assets. As of June 30, Morningstar says, there were 45 mutual funds and 11 exchange-traded funds in this category.
Currency funds invest in US and foreign currencies through short-term money market instruments, derivative including forward currency contracts, index swaps and options, and cash deposits. Morningstar does not assign ratings to these funds because their strategies vary so widely. As of June 30, there were eight mutual funds and 26 ETFs in this category.
Morningstar is also adding an alternative broad asset class to its existing set of five asset classes, US stock, international stock, taxable bond, municipal bond and balanced. The alternative class comprises the currency, long-short, precious metals, and bear market fund categories. The new global real estate category is part of the international stock asset class.
‘We’ve made these adjustments so investors can more properly identify and evaluate real estate and currency funds,’ says John Rekenthaler, vice-president for research for Morningstar. ‘Funds that are now a part of the global real estate category were formerly included in the specialty real estate category under the US stock asset class.
‘The number of currency funds is growing rapidly, especially among exchange-traded funds, and will be better compared to their peers in this new category. The addition of an alternative asset class is a more appropriate classification for currency funds, as well as long-short, precious metals and bear market funds.’
The Morningstar category classifications were introduced in 1996 to classify funds based on how they actually invest. Rather than assign a category to a fund based on the objective stated in its prospectus, Morningstar analyses the fund’s underlying holdings and places them in a category based on their average portfolio statistics during the previous three years.
Morningstar offers internet, software and print-based research products and services for individuals, financial advisors and institutions and provides data on more than 265,000 investment offerings, including stocks, mutual funds and similar vehicles through operations in 18 countries and minority stakes in companies in three other countries in North America, Europe, Australia and Asia.