Morningstar questions FCA's sums in market study critique

Added 12th April 2017

Morningstar has hit back at the FCA over its market study critique of fund ratings agencies.

Morningstar questions FCA's sums in market study critique

The research giant said the FCA's research into ratings was "based on a limited historical data set and suffers from several flaws which we believe should be acknowledged in the final report".

The scathing response comes after the FCA criticised Morningstar by name in its November publication of an Interim Report for its Market Study of Asset Management.

The FCA said fund share classes awarded 'gold' or 'silver' ratings by Morningstar "do not significantly outperform their benchmarks net of charges; net-of-fees excess returns are statistically indistinguishable from zero over various different holding periods".

But Morningstar said the regulator had failed to get its sums right.

It said the FCA had analysed a limited time period in certain calculations, acknowledging that it had not made fuller data available to the regulator in the past.

Morningstar also said the FCA made mistakes in not considering rolilng periods, that it only considered a miniscule amount of funds because of its short time period and that it conflates the firm's Analyst Rating and Star Rating systems.

The firm added that it had performed another analysis and confirmed funds with a gold, silver or bronze badge performed strongly the ratings began in 2002.

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Louise Hill

Senior Reporter

Louise joined Portfolio Adviser in December 2016 as one of the editorial team’s news reporters based in London. Originally from Liverpool, she is an NCTJ-qualified journalist and began her career in 2014 working on local newspapers.



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