EXERTING INFLUENCE: MORNINGSTAR RANKINGS MAKE DIFFERENCE.

Pensions & Investments, March, 1999 by Williamson, Christine

The debate is over. Financial Research Corp., Boston, has proven that Morningstar Inc.'s star system for ranking funds does have a huge influence over the buying behavior of investors. In its latest report, FRC studied in detail the net sales of funds that received Chicago-based Morningstar's sought-after four- and five-star ratings, which are based on risk and return criteria.

Seventy-two percent of net sales of long-term mutual funds in 1998 went to four- and five-star funds. FRC also found that of the 25 best- selling funds in 1998, 22 had four- or five-star ranks. These 25 top funds accounted for almost 40% of total mutual fund inflows last year. Of net flows into corporate bond funds last year, 53% went into four- and five-star funds; 75.6% of equity...

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