Morningstar Canada Launches Manager Research

Learn how Morningstar's bringing back independent fund manager research for Canadian investors.

Ruth Saldanha 31 August, 2022 | 9:19AM
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Ruth Saldanha: Keen-eyed readers of Morningstar Canada may have noticed that over the past couple of weeks, some mutual funds have received a Morningstar Analyst Rating. This is because we have relaunched our manager research team. Here to tell us more about it is Danielle LeClair, Morningstar Canada's Director of Manager Research.

Danielle, thank you so much for being here today.

Danielle LeClair: Great to be here, Ruth.

Saldanha: Congratulations, first of all, on launching this research. Now, what I wanted to ask was some of these funds have already been rated. How did you pick them?

LeClair: Yeah. First of all, we are really excited to bring back the independent research for investors. We really think that's an angle that they need to be aware of. And so, we're really excited about that. And so, how we've tackled it? There's over 3,000 funds and ETFs in Canada. And so, really, rather than target-specific strategies, we came up with broad themes, I guess, you would say that we're looking at. So, the first of those is really taking the insights from investors. So, looking at where they have been placing their money and highlighting those strategies to give them more in-depth knowledge and details on what those strategies are trying to achieve. Secondarily, Morningstar and the research team here is global and people might not be aware of this, but there are some best idea strategies that are available to Canadians. So, we're really looking to bring that global research into Canada and identify those strategies. And then, lastly, we put together a team here of investment professionals that are really excited to find the best funds for Canadians that maybe they don't know about. And so, those are the three categories that we're looking at. The funds that we published so far would fall into one of the first two.

Saldanha: So, going ahead, what is going to be a focus area for you? Put another way, what can Canadian investors expect in terms of what funds are rated?

LeClair: Sure. I mean, that's a great question because one of the things that we're looking at within that framework that I talked about is to identify funds that are really important to Canadians. So, areas like Canadian fixed income, and Canadian equity, where there wouldn't be any other analyst outside of Canada looking at. The other thing is, that Canada has a lot of great options, but sometimes that can be overwhelming. So, in spaces like, say, global equity or asset allocation strategies, we're looking to, again, sort of highlight the ones that are most important that we think would be overall good fits for investors.

Saldanha: One of the things I noticed though is that none of the funds rated so far have a Gold rating. What would it take for a fund to kind of get that extra jump and get a Gold Star?

LeClair: Sure. So, taking a step back, the Analyst Rating is a forward-looking assessment. So, there's more to what we're looking at than just performance. And so, we really lean into the Morningstar pillar process to assess the personality of the strategy. So, those pillars are people – understanding the teams behind the strategies, where do they come from, how do they think, what are their credentials. Secondarily, looking at the process. So, is this a unique process? Do they have the ability to kind of generate returns consistently while also managing risk? That would be the second. And the third is the parent or also known as kind of the asset manager that is supporting the strategy. So, what's the culture there? How do they support their analysts and their investment professionals, and does it actually, again, kind of reflect in the fund? So, ultimately, once you combine the assessment of those and then also look at the price, that's also very important, do we think that a strategy can outperform its benchmark but also its peers? And that is effectively what we'd be looking for in a Gold-rated fund is outliers within those different categories that we really think could provide consistent returns for investors.

Saldanha: Great. Thank you so much for being here today, Danielle.

LeClair: My pleasure. Thank you for having me.

Saldanha: For Morningstar, I'm Ruth Saldanha.

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Ruth Saldanha

Ruth Saldanha  is Editorial Manager at Follow her on Twitter @KarishmaRuth.


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