Morningstar Medalist Ratings

While Morningstar does not typically charge asset managers to include their strategies and associated vehicles in the Morningstar Medalist Rating coverage universe, in Australia and New Zealand, Morningstar will, starting from June 2026, also offer Issuer Initiated Ratings, where Morningstar will receive a fee from an Australian or New Zealand fund manager or financial product issuer for the preparation of a Medalist Rating on their financial product(s). Morningstar will clearly identify each Issuer Initiated Rating.

For a period of time until further notice, Morningstar also intends to continue its coverage of Australia and New Zealand domiciled funds without charging the relevant fund managers or financial product issuers for the preparation of an associated Medalist Rating on their financial product(s).

This change is limited to Australia and New Zealand. Morningstar’s ratings business model remains unchanged in all other markets.

Fees for an Issuer Initiated Rating are not linked to the rating outcome and the paying entity has no influence over the analytical process or rating outcome. The ratings outcome will depend entirely on the strength of the offering of the fund manager based on its People, Parent and Process pillar ratings and its fees as assessed by Morningstar’s Manager Research team in line with our global research methodology. Morningstar’s researchers are operationally separated from Morningstar’s commercial and sales activities to manage any actual, potential or perceived conflicts of interest.

Through intensive client feedback, it was determined that the Medalist Ratings based on any algorithm-driven People, Process and Parent pillars in Australia are not used to the same extent as Medalist Ratings based on analyst-generated fundamental pillars. The Australian market uses ratings as a gatekeeper function and as such we have determined that our efforts are better spent supporting and boosting our qualitative analyst research and rating capability.

The Medalist Rating continues to be a deep assessment of a manager’s Process, People and Parent pillars alongside the relative impact of the fees in relation to other investment fund choices in the same category. Fund costs will be accounted for in all analyst-assigned ratings in Australia (just as they are elsewhere) by the new Medalist Rating Price Score.

Morningstar anticipates the size of the Australian Manager Research team will expand as the coverage breadth of qualitatively rated funds expands, in order to maintain the high quality of research insights.

Morningstar expects the coverage of fund strategies that are qualitatively assessed by analysts to grow materially over time. Currently Morningstar rates around 400 funds qualitatively.

Morningstar is making this change in response to the specific Australian market needs by our clients for increased breadth of qualitative analyst coverage. The Australian market has clearly shown a preference for these qualitative analyst-generated ratings. Morningstar believes its efforts should be focused on qualitatively analyst-generated ratings in Australia.

Effective March 31, 2026, Medalist Ratings based on any algorithm-driven People, Process and Parent pillars in Australian domiciled funds will be discontinued.

From June 2026, Morningstar will offer Issuer Initiated Ratings in Australia and New Zealand.

The research sequence will generally be based on the order by which an Issuer Initiated Rating licence was signed.

Fees for the Issuer Initiated Rating licence should be discussed with your Morningstar account manager.

We are not planning any immediate changes to the funds which are covered. In the longer term, we expect to research funds connected to an Issuer Initiated Rating. The best way to maintain ongoing coverage will be to obtain an Issuer Initiated Rating licence.

Morningstar will calibrate to an annual cycle of review over time. We currently rate managers on an annual basis or on a two-yearly cycle (dynamic coverage) but will always update ratings with any live developments in the marketplace as they unfold.

Yes, going forward, funds that are offered in the Australian or New Zealand markets will require an Issuer Initiated Rating Licence for the promotion and marketing of Morningstar Medalist Ratings in the Australian or New Zealand markets.

Morningstar will work with Essentials Premium clients to transition their licence to the new Issuer Initiated Rating licence.

At this stage, the Issuer Initiated Rating will only be available in Australia and New Zealand from June 2026 onwards.

Yes, we already provide coverage on alternative funds and will extend this coverage over time.

Yes, expected performance fees as outlined by the fund manager in their PDS will be used and will affect ratings.

From March 31, 2026 (under the existing model), and under the new Issuer Initiated Rating model which will start from June 2026, all of the People, Parent and Process pillars will be produced qualitatively by Morningstar’s analysts.

Yes, Superannuation funds will be rated in a similar way, under the Superannuation methodology which applies a higher weight to the Parent Pillar (25%).

Parent pillar ratings will be assigned in the same way as they currently are qualitatively, by a combination of our local and global ratings committee. Our qualitative approach to rating the Parent pillar won’t change.

We categorise funds by asset class and style to create peer groups that are as closely comparable as possible. Morningstar has a global categorisation team which seeks guidance from regions such as Australia as to how best to categorise a fund.

This is because for passive funds, which take a lower level of active risk, fees are a more material driver of the end investor return than for active funds.

This is being discussed internally and a decision will be made in due course.

We are still determining the parameters for funds that are eligible to be considered under the Issuer Initiated Rating model.

We have not made a decision on that at this stage. We will at all times choose the approach which puts the efficacy of the rating and investor returns as our first priority across our whole coverage universe.

We are actively exploring extending the Issuer Initiated Rating model to managed accounts.

Our qualitative analyst team will write and edit the reports.

The research process in terms of what information we require from a fund manager to conduct a qualitative review will not change from the current process. We seek detailed RFI information both of a qualitative and quantitative nature.

We assess funds based on fundamental factors and observations about portfolio holdings and construction. This informs our ratings on the People, Process and Parent pillars. Performance is not a pillar. We rate funds qualitatively with a forward-looking viewpoint.

Yes, licence holders will be able to use the rating in a way that is consistent with the existing Morningstar Essentials Premium licence terms and conditions. For more details, please speak with your Morningstar account manager.

Please speak with your Morningstar account manager to discuss Morningstar’s research audience.