Morningstar Launches Estimated Quarterly Returns for Hedge Funds

CHICAGO, June 21, 2011 /PRNewswire/ -- Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced that it has begun to calculate estimated returns for hedge funds based on publicly available filings. The company has estimated quarterly returns for approximately 1,700 hedge funds, including some of the largest and most prominent in the industry.

Although hedge funds do not have to publicly file disclosures, many entities that hold hedge funds, like registered funds of hedge funds, do. Morningstar culls information from these funds of funds using two types of filings to estimate returns—portfolio holdings disclosures and financial statements. From these filings, Morningstar collects the beginning market value of an individual hedge fund holding in a fund of hedge funds and the ending market value. If the fund of funds did not add or remove cash from the underlying hedge fund during the period, Morningstar can calculate an estimated return.

"The vast majority of hedge fund assets are concentrated in a small number of very large funds, and it's precisely these funds that are the least likely to report performance," said John Rekenthaler, vice president of research for Morningstar. "These new estimated returns can provide a unique window into the performance of popular hedge funds and the entities that invest in them."

When multiple registered funds of hedge funds hold the same hedge fund, Morningstar reports the median return as the estimated performance. Morningstar also lists each individual performance estimate related to the fund as well as the name of the registered hedge fund investor. Performance estimates of a fund may vary from one investor to another due to differences such as fees.

"In contrast to the self-reported composite returns provided to hedge fund databases or the audited performance numbers in registered funds' annual reports, estimated performance reflects the actual experience of specific investors. With estimated returns, we not only get an overall picture of performance, but we can see how different investors fared with their investments in the same hedge fund," Rekenthaler added.

Morningstar has approximately 11,000 hedge funds and funds of hedge funds in its database. Estimated hedge fund returns are currently available as a licensed data feed and will be available in Morningstar Direct(SM), the company's web-based global research platform for institutional investors, in the coming months. To view the methodology, please visit http://global.morningstar.com/EstHFReturn.

This release is not intended to be an offer or solicitation for the sale of hedge funds. The information is not warranted to be accurate, complete, or timely. When considering hedge funds, investors should consider various risks, including the fact that some products engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager. The high degree of leverage that is often obtainable in trading can lead to large losses as well as gains. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results.

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 approximately 390,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 5 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services and has nearly $140 billion in assets under advisement and management as of March 31, 2011. The company has operations in 26 countries.

©2011 Morningstar, Inc.  All rights reserved.

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SOURCE Morningstar, Inc.