Morningstar Introduces New Categories for Alternatives

May 9, 2011 (PLANSPONSOR.com) - Morningstar, Inc. has added 10 new alternative investment categories within the Morningstar Category classification system.

The new alternative categories for the broad universe of funds are: 

  • Managed Futures: These funds typically take long and short positions in futures or other derivative contracts according to a trend-following or momentum strategy; and 
  • Multialternative: These funds offer investors exposure to a combination of strategies like long-short equity and debt, managed futures, global macro, and convertible arbitrage, among others.  

 

Get more!  Sign up for PLANSPONSOR newsletters.

The new alternative categories for ETFs are: 

  • Volatility: These funds trade volatility as an asset class and aim to profit from turbulence in the financial markets; 
  • Trading—Leveraged Commodities: These funds seek to generate a daily or weekly return that is a certain number of times larger than the return of the reference commodity index; 
  • Trading—Inverse Commodities: These funds seek to generate a daily or weekly return that is a certain number of times larger than the reference commodity index but in the inverse, or opposite, direction; 
  • Trading—Leveraged Debt: These funds seek to generate a daily or weekly return that is a certain number of times larger than the return of the reference fixed-income index; 
  • Trading—Inverse Debt: These funds seek to generate a daily or weekly return that is a certain number of times larger than the reference fixed-income index but in the inverse, or opposite, direction; 
  • Trading—Leveraged Equity: These funds seek to generate a daily or weekly return that is a certain number of times larger than the return of the reference equity index; 
  • Trading—Inverse Equity: These funds seek to generate a daily or weekly return that is a certain number of times larger than the reference equity index but in the inverse, or opposite, direction; and 
  • Trading—Miscellaneous: These funds seek to generate a daily or weekly return that is a certain number of times larger than the short-term returns of an index in either a positive or negative direction.  

 

Funds populating these new categories come primarily from Morningstar’s existing alternative categories, including Long/Short, Market Neutral, Bear Market, and Currency. Funds in the seven Trading categories will not receive a Morningstar Rating, because they are primarily designed as short-term holdings.   

The new category assignments are available in Morningstar’s Web-based products now, and Morningstar expects to roll them out in all Morningstar products in the second quarter.  

The Morningstar Category Classifications methodology is available at http://corporate.morningstar.com/CategoryClassifications.

«