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Morningstar Offers New Fund Performance Tool


Morningstar has launched a new performance tool, Morningstar Investor Return, which will provide data on open-end mutual funds and exchange-traded funds to capture how the average investor fares in a fund over a period of time as they buy in and out of the fund. It complements the more traditional metric of total return, which measures what investors could have earned had they bought and held the fund, reinvesting all dividends, over a period of time.

For example, if a fund with just a few million dollars delivered stellar returns but then faltered as assets began to pour in, the performance analysis would place greater emphasis on the fund during the period when its assets were larger.

"Investors know they should hold diversified portfolios, but many chase past performance and end up buying funds too late or selling too soon," said Don Phillips, managing director of Morningstar.

"Fund companies don't have complete control over how investors use their funds, but that doesn't mean they can't exercise any control," Phillips added. "Fund companies can influence investor behavior through fund design, the timing of launches and closings, marketing efforts and shareholder communications. With access to investor returns, investors and advisers can determine which fund companies are successfully deploying strategies that result in a better outcome for investors."

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