Star Wars Fund-Research Firms Argue over Whether Ratings Make Sense

By Stan Hinden 1994, The Washington Post | St Louis Post-Dispatch (MO), August 5, 1994 | Go to article overview

Star Wars Fund-Research Firms Argue over Whether Ratings Make Sense


Stan Hinden 1994, The Washington Post, St Louis Post-Dispatch (MO)


In a world that prizes five-star restaurants, four-star movies and the Good Housekeeping Seal of Approval, what's wrong with a rating system for mutual funds?

Plenty, believes A. Michael Lipper, head of Lipper Analytical Services Inc. Lipper has been tracking mutual-fund performance for 21 years.

Putting a five-star label on mutual funds, Lipper maintains, leads investors to believe those funds will be the winners of the future - and it just isn't so.

Lipper's complaints, delivered in a memo to mutual-fund executives in May, were directed at Morningstar Inc., his main rival in the mutual-fund research business. Morningstar, now 10 years old, has developed a star system for rating mutual funds that is widely quoted in advertisements and used by investors.

Morningstar officials quickly called foul when they heard of Lipper's criticism. The star rankings were never intended to predict how funds would do in the future - only to tell investors how the funds had done in the past, said Don Phillips, publisher of Morningstar Mutual Funds.

This nasty little spat between Lipper and Morningstar came at a time when the Securities and Exchange Commission is talking about the idea of a labeling system for mutual funds that would include risk levels.

But it may be difficult to find a practical way to label funds - which change their investments rapidly.

Phillips pointed out that the user's guide to Morningstar publications always has made it clear that the research service was not trying to predict future performance and that the stars were only a first screening for an investor who is choosing mutual funds. The guide describes the stars as "more descriptive than predictive."

The chief difference between the Lipper and Morningstar operations is the difference between a scorekeeper, who tells you who is winning and losing, and a game analyst, who tries to tell you what the score means and what strategies worked.

Lipper's firm ranks funds by gains or losses over various time periods and compares their performance with other funds that have similar investment goals.

Morningstar, on the other hand, reports the numbers but also analyzes a fund's behavior, its investment policies, its sales charges and the amount of risk it took to achieve its results. …

The rest of this article is only available to active members of Questia

Already a member? Log in now.

Notes for this article

Add a new note
If you are trying to select text to create highlights or citations, remember that you must now click or tap on the first word, and then click or tap on the last word.
One moment ...
Default project is now your active project.
Project items
Notes
Cite this article

Cited article

Style
Citations are available only to our active members.
Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

(Einhorn, 1992, p. 25)

(Einhorn 25)

(Einhorn 25)

1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

Note: primary sources have slightly different requirements for citation. Please see these guidelines for more information.

Cited article

Star Wars Fund-Research Firms Argue over Whether Ratings Make Sense
Settings

Settings

Typeface
Text size Smaller Larger Reset View mode
Search within

Search within this article

Look up

Look up a word

  • Dictionary
  • Thesaurus
Please submit a word or phrase above.
Print this page

Print this page

Why can't I print more than one page at a time?

Help
Full screen
Items saved from this article
  • Highlights & Notes
  • Citations
Some of your highlights are legacy items.

Highlights saved before July 30, 2012 will not be displayed on their respective source pages.

You can easily re-create the highlights by opening the book page or article, selecting the text, and clicking “Highlight.”

matching results for page

    Questia reader help

    How to highlight and cite specific passages

    1. Click or tap the first word you want to select.
    2. Click or tap the last word you want to select, and you’ll see everything in between get selected.
    3. You’ll then get a menu of options like creating a highlight or a citation from that passage of text.

    OK, got it!

    Cited passage

    Style
    Citations are available only to our active members.
    Buy instant access to cite pages or passages in MLA 8, MLA 7, APA and Chicago citation styles.

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn, 1992, p. 25).

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences." (Einhorn 25)

    "Portraying himself as an honest, ordinary person helped Lincoln identify with his audiences."1

    1. Lois J. Einhorn, Abraham Lincoln, the Orator: Penetrating the Lincoln Legend (Westport, CT: Greenwood Press, 1992), 25, http://www.questia.com/read/27419298.

    Cited passage

    Thanks for trying Questia!

    Please continue trying out our research tools, but please note, full functionality is available only to our active members.

    Your work will be lost once you leave this Web page.

    Buy instant access to save your work.

    Already a member? Log in now.

    Search by... Author
    Show... All Results Primary Sources Peer-reviewed

    Oops!

    An unknown error has occurred. Please click the button below to reload the page. If the problem persists, please try again in a little while.