Morningstar Inc, an independent investment research firm, has started offering in India qualitative ratings for mutual funds which will look into factors like people managing the fund, quality of investment process and the pedigree of the fund company. Most mutual fund ratings available in India so far are quantitative in nature that is they are based on historical performance on the risk and return parameters.
Under this rating system, Morningstar has classified the rating into five categories- elite, superior, standard, inferior and impaired. In Elite rating the particular fund is capable of outperforming their peers over the long term. The Superior rating funds give above average returns and capable of producing peer-beating returns.
Standard give average returns, Inferior ratings funds are likely to underperform their peers through time and Impaired ratings indicate poor investments.
Morningstar had begun offering qualitative rating first in Europe last year.
