Morningstar has almost single-handidly kept the mutual fund world in-line. For years, over 80% of new mutual fund assets have gone into Morningstar four and five-star rated funds. A negative Morningstar research report can cripple a fund or fund company. But today, Morningstar may have their own business challenges with ETFs.
Morningstar reports and provides statistics on ETFs. In fact, in partnership with Barclays, they have a small stable of their own ETFs. However, with most of their revenue coming from mutual fund research, it appears they may be conflicted in the guidance they provide to institutions they serve and retail investors who pay for their research.
The bottom-line is ETFs where made for Morningstar but they are having a difficult time admitting it.
Dan Culloton, one of Morningstar’s lead researcher writes, "We acknowledge that ETFs are cheaper and more tax efficient than most traditional mutual funds, but they don’t trump them all." In the article he offers 14 conventional mutual funds that, in his opinion, beat ETFs based on price, tax efficiency and performance.
Ouch! With over 8000 mutual funds, I’m glad he was able to find 14.
The opinions and forecasts expressed herein are solely those of Tom Lydon, and may not actually come to pass. Information on this site should not be used or construed as an offer to sell, a solicitation of an offer to buy, or a recommendation for any product.