We have refreshed the Morningstar Medalist Rating methodology to improve transparency, consistency, and comparability across funds. The Medalist Rating is Morningstar’s forward-looking assessment of funds, helping investors identify those expected to outperform within a category. Changes under the new methodology offer a fresh read on which funds stand out and which may be worth reconsidering.
Under the updated approach, ratings are now assessed on a category-relative basis, and funds are no longer graded on a forced distribution curve. Previously, this curve limited the number of Gold-, Silver-, and Bronze-rated funds within each category. It has been replaced by fixed thresholds, which will also help to create a more stable set of ratings.
A key enhancement is the introduction of a dedicated Price Score. Previously, fees were incorporated by deducting them directly from a fund’s pre-fee score. To improve clarity, we now assign an explicit Medalist Rating Price Score, which ranges from negative 2.5 to positive 2.5 based on a fund’s fee percentile within its category. Our recent research, The Enduring Predictive Power of Fees in Asia, reinforces that fees remain one of the strongest predictors of a fund’s future success, and this new measure helps reflect that relationship in a more transparent way.
Importantly, the core of our assessment remains unchanged. We continue to evaluate funds based on three fundamental pillars: People, Process, and Parent.
We have implemented the updated methodology across all rated funds at once, so current ratings already reflect the new approach. For more details, please refer to our methodology paper and related column.
Impact on Funds’ Medalist Ratings
Where rating changes have occurred under the updated methodology, they have typically been limited to a one-notch movement. Meanwhile, at an aggregate level, the changes have resulted in more Gold and Silver ratings, and fewer Bronze, Neutral, and Negative ratings.
Looking at the impact by Morningstar Category, some categories were more affected than others, reflecting the shift toward category-relative assessments and the varying influence of fees. A notable example is the US large-cap category, where the relatively low alpha potential previously constrained active funds’ ability to achieve higher ratings. Under the new methodology, some funds with strong fundamentals and reasonable fees are seeing upgrades. Allocation funds are another category with a relatively higher number of upgrades, with the newly introduced Medalist Rating Price Score helping to better capture the fee relativities within a given Morningstar Category.
In identifying funds that saw rating changes (Exhibit 1), we focused on analyst-rated strategies across core asset classes that Asia-based investors commonly consider when building their portfolios. These include categories such as US Large-Cap Blend Equity, Asia ex-Japan Equity, Global Diversified Bond, and Asia Bond. To ensure relevance, we included only retail share classes available for sale in at least one of the region’s three major markets: Hong Kong, Singapore, and Taiwan.
Exhibit 1: Funds (Retail Share Classes) in Asia That Saw Medalist Rating Changes
We take a closer look at a few prominent funds to highlight whether their retail share class saw a rating change and the key drivers behind these moves.
BGF Asian Tiger Bond: The fund draws on strong research resources and a team with a clear focus on identifying value across Asian bond markets. These strengths merit Above Average scores for both the People and Process pillars. Combined with the retail share class’s reasonable pricing, which sits in the middle quintile of the category, this supports a Medalist upgrade to Bronze. Meanwhile, several lower-cost share classes saw more pronounced upgrades, with the cheapest institutional share class moving from Bronze to Gold.
BGF Global Allocation: Under the previous methodology, allocation funds often found it difficult to achieve Gold, Silver, or Bronze ratings due to the challenges these strategies faced in outperforming their category benchmarks after accounting for their relatively higher costs. Under the new approach where fees are considered on a peer-relative basis, the underlying strengths of many of these funds shine through more clearly, resulting in a higher number of upgrades across the category. Few global balanced funds match the BGF Global Allocation in terms of disciplined risk oversight, strategic thinking, and depth of resources. These strengths help the fund stand out in the category and support a one-notch upgrade to Bronze for its A2 retail share class.
BGF Global Multi-Asset Income: The strategy has witnessed some recent leadership turnover and uneven team depth across its underlying investment sleeves, which tempers our conviction in this multi-asset, income-oriented strategy. Furthermore, the A2 retail share class’s high fees, which sit in the second-most-expensive quintile within an already pricey category with a median fee of 1.5% per year, continue to hold back its rating at Neutral under the new methodology. On the other hand, the more reasonably priced D2 and D6 share classes, which sit in the cheapest quintile among peers, saw a significant boost to their ratings, moving from Neutral to Silver.
Capital Group New Perspective Fund: The strategy boasts an accomplished management roster and a deep global analyst bench, combined with a proven investment approach. These fundamental strengths shine through, resulting in a one-notch upgrade for its B share class to Bronze.
Morgan Stanley Global Opportunity: This popular global large-cap growth offering is led by an excellent manager who employs a highly distinctive approach. While the strategy boasts many strengths, the high fees of its A retail share class, which sits in the most expensive quintile of its category, keep its rating at Neutral. That said, the strategy’s lower-cost I share class, which sits in the second-cheapest quintile, received a one-notch higher rating of Bronze.
Pimco GIS Income Fund: This fund behemoth is run by Dan Ivascyn, who manages this aggressive, wide-ranging strategy with many levers at his disposal to produce an appealing yield, resulting in a High People score and Above Average Process rating. However, the E retail share class does not see a change from its Bronze rating. The share class sits in the most expensive quintile versus peers, which holds it back from achieving a higher rating. Meanwhile, the strategy’s cheaper Institutional share class received a one-notch increase from Silver to Gold. This is notable given the increasing availability of these lower-cost share classes on certain fund distribution platforms in Asia.
