The star rating cannot be bought, but it only grades the past, and the firm sells data to the funds it rates.
What it's really for An investment-research firm; the star rating can't be bought, but it sells data to the funds it rates.
What our grade covers The grade on this page is about its 1-5 star fund ratings and Medalist analyst ratings, not everything the site does.
High Scoring Confidence Checked against primary sources. We are confident in the facts and the grade here.
The flagship star rating itself cannot be bought and Morningstar says asset managers do not pay to be rated, but the company's revenue comes overwhelmingly from selling data, software, indexes, and credit ratings to those same fund firms and advisors, and the SEC fined its credit-ratings unit $3.5 million in 2020 after analysts engaged in sales and offered inflated "indicative ratings" to win issuer business, showing the commercial-vs-analytical wall has been breached at least once.
Source →- Operating since
- 1984 (42 years) · source
- What it costs you
- Partly paywalled Some content is free, but the full reviews or detailed ratings sit behind a paid subscription.
- How they make money
- It makes money from subscriptions and data/software/index/credit-ratings licensing (Morningstar Direct, PitchBook, Data & Analytics, Indexes, DBRS Morningstar Credit), much of it sold to the asset managers and advisors whose products it rates; 2024 revenue was about $2.3 billion.
- What they do
- It produces the quantitative 1-to-5 "star" rating that ranks funds and ETFs by trailing risk-adjusted return versus category peers, plus the forward-looking analyst-driven Medalist Rating (Gold/Silver/Bronze).
- What to watch for
- The headline star rating is purely backward-looking and, as the Wall Street Journal documented, does not reliably predict which funds will outperform, so a high star count is a report card on the past, not a buy signal for the future.
- Composite score
- 3.20 / 5.00 → grade B-
How the grade was reached
Does the site take money from the very entities it ranks? Pay-for-placement, vendor-funded data, and affiliate commissions all pull this down. The less the ranking can be bought, the higher the score.
What is the ranking actually built on? Hands-on testing scores highest, then verified first-hand reviews, then opinion or popularity surveys and self-reported figures, then pay-to-rank, which scores lowest.
Is the methodology published, specific, and reproducible? Can a reader see how a given rank was reached, or is it a black box?
Are commercial relationships, sponsorships, and affiliate arrangements disclosed clearly and near the rankings themselves, rather than buried?
How hard is it to game? Controls against fake reviews, solicited reviews, and vendor gaming raise this; an open box anyone can stuff lowers it.
Evidence
- Joe Mansueto founded Morningstar in 1984 in his Chicago apartment; the company went public in 2005 and Mansueto remains executive chairman, making it an independent firm with no corporate parent. Source: Morningstar, Inc. — Wikipedia →
- The star rating is a quantitative, backward-looking measure of trailing 3-, 5-, and 10-year risk-adjusted returns versus category peers (top 10% get 5 stars); Morningstar states it 'isn't paid by fund companies to rate their products,' so placement is not for sale, but the rating is explicitly not predictive. Source: Understanding Morningstar's ratings (FAQ) →
- SEC fined Morningstar Credit Ratings $3.5 million in 2020 because, from mid-2015 to 2016, credit analysts engaged in sales/marketing to win issuer business and in some cases offered inflated 'indicative ratings' exceeding competitors — a documented breach of the conflict-of-interest separation between analysts and revenue. Source: SEC Press Release 2020-112 →
- The 2017 WSJ 'Morningstar Mirage' investigation found investors pile into 5-star funds expecting outperformance and are then disappointed, because the backward-looking ratings have little ability to predict future fund performance. Source: WSJ investigation summary (New Constructs) →