Morningstar today unveiled a new rating system for hedge funds, similar to the one- to five-star rating system used by the firm to rank mutual funds. Morningstar analysts will use quantitative and qualitative processes to analyze hedge funds risk-adjusted performance. Only single and multistrategy hedge funds with a minimum track record of 28 months will be ranked. Of the 4,400 hedge funds in Morningstars database, about 1,800 will receive ratings.
Also debuting today is the Morningstar 1000 Hedge Fund index as well as 17 hedge fund strategy-specific indexes. According to a news release, each index is composed of 90% of the single and multistrategy hedge funds within Morningstars database. The MHFI 1000 index is valued daily.
We want to make researching hedge funds a more transparent process and our new rating and indexes will allow investors to better evaluate and compare hedge funds to their peers, John Rekenthaler, vice president of research, said in a news release.
(Amended Feb. 26)