Morningstar expands coverage of alternatives universe

Initial coverage encompassed 40 funds; so far, only one merits a gold star

Morningstar Inc. is expanding its analyst ratings and global fund reports to encompass approximately 40 alternatives mutual funds, which represent 75% of alternative-fund assets, the company announced this morning.

The analyst ratings, which, unlike the company’s star ratings, are forward looking, were launched a year ago and applied mostly to traditional fund strategies.

Nadia Papagiannis, director of Morningstar’s alternative fund research, said the goal is to expand the coverage to 100 alternative funds over the next year.

“The strategies employed in alternative funds are often new and sometimes complex,” she said. “Our goal with the analyst ratings and global fund reports for these alternative investments is to help institutions and financial advisers research and compare funds as they continue to seek diversification through alternative investments.”

Of the alternative funds included in the debut of the expanded coverage, one fund has a gold rating, nine funds are silver, seven are bronze, 17 funds are rated as neutral, and six funds have a negative rating.

“Our recent survey about the perception and usage of alternative investments found that financial advisers and institutions continue to use alternatives,” Ms. Papagiannis said. “While inflows to equity-based alternative mutual funds have slowed, investors continue to flock to non-equity-based funds, such as managed futures mutual funds.”