The Morningstar Fiduciary Grades: A Critical Analysis
Melanie L. Fein
Fein Law Offices
October 14, 2004
This paper examines the “Fiduciary Grade for Mutual Funds” developed and released by Morningstar, Inc. In particular, it examines the utility of the Fiduciary Grades as a tool for bank trust departments and other corporate fiduciaries that invest fiduciary assets in mutual funds.
This paper concludes that the Fiduciary Grades are a flawed investment tool because they do not encompass all of the relevant factors an investor should consider when investing in mutual funds, apply questionable standards, and are not a substitute for the exercise of fiduciary discretion with respect to an individual fiduciary account. The Fiduciary Grades have a limited focus and are not a reliable indicator of a mutual fund’s compliance record, quality of fund management, or suitability as a fiduciary investment. Unquestioning reliance on the Fiduciary Grades could result in misguided investment decisions.
Number of Pages in PDF File: 48
Keywords: Morningstar, Fiduciary Grades, Fiduciary, Investment, Mutual Fund, Rating, Investment Toolworking papers series
Date posted: August 21, 2010
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