2014

Morningstar Launches Target-Date Fund Series Ratings and Research Reports Vanguard receives highest ratings, Oppenheimer lowest

CHICAGO, Sept. 9 /PRNewswire-FirstCall/ -- Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today launched ratings and in-depth research reports for 20 of the largest target-date mutual fund series. Morningstar identified Vanguard as the best target-date provider for investors based on such criteria as management, fees, and performance. Oppenheimer rated the lowest.

"Target-date funds serve as the core holding for millions of investors as they plan for retirement--often as the only holding--and are increasingly an automatic default option within defined contribution plans. Because they play such a pivotal role in today's portfolios, it's critical for investors to select or have access to a high-quality target-date fund from an investor-focused fund family," said Laura Pavlenko Lutton, editorial director in Morningstar's mutual fund research group. "Our new ratings and research reports are designed to help individual investors, financial advisors, and plan sponsors make the best possible decisions when evaluating a series of target-date funds."

Morningstar evaluates target-date funds on five components--People, Parent, Performance, Portfolio, and Price. People and Parent ratings are determined by both qualitative and quantitative measures of the funds' management processes. Performance, Portfolio, and Price ratings use quantitative measures to evaluate the quality of both the target-date funds and the underlying holdings in which they invest as well as the cost that investors must pay. Morningstar assigns one of five ratings for each component: Top, Above Average, Average, Below Average, or Bottom. Based on the five component ratings, each target-date fund series earns an overall rating using the same grade scale.

The Vanguard Target Retirement target-date funds received the highest rating from Morningstar analysts. This series employs best practices with low fees, a high level of transparency, and prudent, investor-oriented management. Vanguard's high-quality orientation was an important factor in 2008, when the family's target-date funds performed relatively well despite holding a stock allocation similar to many of its peers. Vanguard's long-tenured managers also bolster the funds' appeal.

The lowest rating went to Oppenheimer. A relatively aggressive asset allocation and severe problems in some of the funds' underlying bond holdings led to very poor performance in 2008. Investor losses were further compounded by the steep fees associated with these funds; Oppenheimer has the highest fees among all target-date fund families that Morningstar tracks.

"Though many target-date funds are sound investments, there's room for improvement. Price is a key component in our rating system for target-date series because over the many years, even decades, that an investor may hold a target-date fund, the compounding advantage of lower expenses can be sizable. Vanguard is currently the only truly low-cost provider in this space, although other firms have indicated they'll launch cheaper, indexed options too," Lutton said. "There is also a need for better disclosure. Transparent, easily accessible information on the rationale or research behind fund companies' asset allocation decisions is rare. In addition, many fund companies can make strides in providing more detailed, timely, and useful information regarding their target-date funds' underlying investments."

Morningstar Target-Date Fund Series Ratings and Research Reports are now available in Morningstar((R)) Principia((R)), and will be available in the coming months in Morningstar((R)) Advisor Workstation(SM) Enterprise Edition, Morningstar((R)) Office, Morningstar((R)) Site Builder(SM), and through licensed data feeds. Morningstar.com, the company's Web site for individual investors, publishes the ratings and a modified version of the report.

For additional information about Morningstar's target-date fund evaluation and rating methodology, please visit http://global.morningstar.com/TargetDateReports.

About Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on nearly 325,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 19 countries and minority ownership positions in companies based in three other countries.

(C)2009 Morningstar, Inc. All rights reserved.

    Media Contact:
    Alexa Auerbach, 312-696-6481 or alexa.auerbach@morningstar.com

MORN-R

SOURCE Morningstar, Inc.



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