Morningstar Ratings

[EssDeeAitch]

Question from a self-investing newby

Is using Morningstar ratings a good way to sift out funds at second pass? First pass would be to sort by returns over say 1,3 or 5 years then to sort by Morningstar Rating (5 or 4/5) to get down to a manageable list of funds for detailed scrutiny.

Any help appreciated

[tjh290633]

I am not sure that ratings of any sort are a guide to what you wish to invest in. The objectives of a fund and how well it has achieved those over the years are a far better guide.

TJH

[ermintrade]

I agree with tjh. Some of the funds with good Morningstar ratings seem to me to be poor or average performers. It's better to do your own research, bearing in mind what your investmenr objectives are.
Have a look at this video interview with Peter Hewitt, the F&C fund manager. He talks about how he selects Investment Trusts for the portfolios he manages. http://citywire.co.uk/investment-trust- ... video-list
Then have a look at the top ten constituents of his 2 portfolios, Growth and Income. You get a good idea of how he thinks.
Regards
ermintrade

[EssDeeAitch]

I agree with tjh. Some of the funds with good Morningstar ratings seem to me to be poor or average performers. It's better to do your own research, bearing in mind what your investmenr objectives are.
Have a look at this video interview with Peter Hewitt, the F&C fund manager. He talks about how he selects Investment Trusts for the portfolios he manages.
Then have a look at the top ten constituents of his 2 portfolios, Growth and Income. You get a good idea of how he thinks.
Regards
ermintrade

Thanks for the response, appreciated. Interesting interview, checked out the portfolios as suggested and pleased to see some of my picks there.

[forrado]

I stand right behind F&C’s Peter Hewitt when it comes to the world of investment trusts – KNOW YOUR MANAGERS.

In my experience good IT managers tend to be in the job longer than their open-ended counterparts. The better ones are not as prone to seek greener pastures elsewhere. With the result they have been given time, with the oversight of a Board of Directors, to develop an investment process that has been proven to work. And, what is more, a process that is not encumbered by the necessity to sell holdings that might not otherwise be sold in order to match redemption demands of UT / OEIC unit holders. This gives an IT manager the advantage of being able to take a longer-term view, which in my opinion is why ITs tend to stand up better during periods of market turmoil. The very closed-end structure of an IT affording greater defensive ‘NAV’ protection than that of an open-ended mutual fund. I stress net asset value (NAV), and not the share price because overtime it is the performance of the underlying assets that all fund managers are measured by. An IT manager has next to no control over a trust’s share price, that’s the function of the market to determine.

One last point, while there’s no substitute for experience, fund investors should always be on the look-out for new talent. Because though many an IT has a proclivity of outliving its shareholders, the same also goes for long-serving fund managers who at some point will be replaced. It’s an investor’s responsibility to form an opinion as to the capability of, not only the present incumbent but that of his / her replacement. So, to finish were I started – KNOW YOUR MANAGERS.

[flint]

EssDeeAitch

As Forrado says - know your managers.

The Morningstar manager ratings - Gold, Silver etc. I find very useful. Not all ITs have a manager rating, but, for those that do, this rating is explained in some detail under the heading of Analyst research. In my opinion this is well worth reading, I would not invest in an IT with a poor manager rating.

The Star ratings represent the MS view on past performance, not so useful, as you can easily form your own opinion from the data available on the AIC website, the ITs own website and MS.