Morningstar updated its Medalist Rating methodology in late April. Among other changes, the simplified process produces ratings that reflect our conviction in a fund’s ability to outperform its category, not its benchmark.
Moving to a category‑relative approach means each peer group now has a roughly equal share of Medalist‑rated funds—about one‑quarter of Canadian share classes. Categories that previously had a higher concentration of Medalists saw net downgrades, including Canadian equity and Canadian fixed income. Categories with fewer Medalists saw net upgrades, including allocation funds, global equity, and US equity.
Ratings also shifted within categories. A key driver was the introduction of the Medalist Rating Price Score, which measures fee competitiveness. The score ranges from -2.5 to +2.5, with 0 representing the median fee in a category. Funds that charge less than the category median receive a positive adjustment, while higher-cost funds are penalized.
Algorithm-rated funds experienced an additional change. Morningstar updated its pillar rating methodology, replacing a random forest model with a weighted calculation. This article focuses on analyst-rated funds because their Parent, People, and Process ratings did not change. As a result, any Medalist rating movement reflects the new Medalist calculation rather than a shift in pillar score.
With that context, the sections below highlight notable upgrades and downgrades by category among the largest open-end funds and ETFs in Canada.
Allocation Fund Rating Upgrades
The share of allocation fund share classes rated Gold, Silver, or Bronze rose to 28% from 10%. Under the prior benchmark‑relative framework, high fees in balanced categories made net‑of‑fee benchmark outperformance hard to achieve. In the Global Neutral Balanced category, the median fee, which corresponds to a Medalist Price Score of 0, was 1.74%. That compares with a median fee of 1.50% for global equity funds and 0.84% for Canadian fixed‑income funds.
Under the new category‑relative approach, fees still matter, but they’re assessed against category peers. That shift benefited balanced funds that are cheaper than competitors, reflected in positive Medalist Price Scores. Vanguard Growth ETF Portfolio and EdgePoint Global Growth and Income Portfolio Series F both moved to Gold, from Silver and Bronze, respectively. BMO Balanced ETF Portfolio F upgraded to Bronze from Neutral.
Funds with strong People and Process pillar ratings also benefited. Each pillar accounts for 31.5% of the total weighted Medalist Rating calculation for active funds. For passive funds, Process is weighed more heavily than People, but the two pillars still collectively account for 54% of the total weighted Medalist Rating score. RBC Select Balanced Portfolio, the largest balanced fund in Canada, upgraded to Bronze from Neutral on its A‑series shares and to Silver from Bronze on its lower‑cost F‑series shares, supported by Above Average ratings for both People and Process.
Allocation Fund Upgrades
Global Equity Rating Upgrades
The share of global equity fund share classes rated Gold, Silver, or Bronze rose to 32% from 13%.
Fidelity Global Innovators, the largest global equity fund in Canada, advanced to Gold, as did Vanguard All‑Equity ETF Portfolio, a passive option. Funds that received an upgrade shared two traits: Above Average or stronger Parent, People, and Process ratings, and fees below the category median.
Global Equity Upgrades
US Equity Rating Upgrades
US equity funds also saw a net increase in Medalist ratings. Many large passive S&P 500 ETFs were already rated Gold, and they remained there. Several higher‑fee index funds that weren’t previously at the top tier were upgraded, including the BMO US Equity ETF A share class.
Three large active US equity funds also moved to Silver from Neutral: NBI US Equity F (sub‑advised by PineStone), Sun Life MFS US Growth F, and Beutel Goodman American Equity Class F. As with global equity upgrades, these funds combined Above Average or higher People and Process ratings with fees below the category median.
US Equity Upgrades
Passive ETF Rating Upgrades
Passive ETFs were major beneficiaries across categories. Their lower peer‑relative fees translated into higher Medalist Price Scores, and the methodology amplified that advantage by assigning a 40% weight to price for passive funds, compared with 30% for active funds. That dynamic held even in categories that saw net declines in Medalist ratings, including Canadian equity and Canadian fixed income.
Passive ETF Upgrades
Canadian Equity Rating Downgrades
The share of Canadian equity funds rated Gold, Silver, or Bronze fell to 25% from 33%. EdgePoint Canadian Portfolio Series A and Fidelity Canadian Opportunities Series B were each downgraded to Neutral from Bronze because their fees were high relative to peers. Other downgrades to Neutral reflected a combination of average fees and Average Process ratings, which were not enough to support conviction in category‑relative outperformance.
Canadian Equity Downgrades
Canadian Fixed Income Rating Downgrades
The share of Canadian fixed-income funds rated Gold, Silver, or Bronze fell to 21% from 31%. The decline reflects the higher bar set by category‑relative outperformance compared with the prior benchmark‑relative approach. Under the old framework, benchmark outperformance was more common, driven in part by persistent tilts toward corporate bonds.
Downgrades clustered among higher‑fee funds. The A‑series share classes of CI Canadian Bond and CI Canadian Bond Corporate were both downgraded to Negative from Neutral, while their lower‑cost F‑series share classes were unchanged. The split outcome highlights the stronger influence of fees under the new methodology.
