Morningstar has launched qualitative research and ratings for passive funds, assigning a Morningstar Analyst Rating for 25 of the most popular index funds in the UK.
Among the rated funds, 23 funds were Morningstar Medalists, which are funds that receive a Morningstar Analyst Rating of Gold, Silver, or Bronze.
Of these, nine received a Morningstar Analyst Rating of Silver and 14 were Bronze; none received a Gold rating. Two funds were rated Neutral.
Morningstar director of global passive funds research Ben Johnson said: "The popularity of index funds and exchange-traded products is on the rise, and we are putting them on a level pitch with their actively managed counterparts to help investors make better decisions.
"Our analysts have weighed the merits of the first 25 index funds to receive a Morningstar Analyst Rating against their actively managed peers in their Morningstar categories and also relative to comparable index funds and exchange-traded funds. It should come as no surprise that the top-rated funds we have analysed are amongst the lowest-cost investment options."
Morningstar's Analyst Rating for passive funds draws from the company's global fund research methodology used by Morningstar fund analysts worldwide.
The methodology considers five key pillars-people (the manager and supporting research team), the investment process, the parent group, performance, and fees.
In addition, passive funds are scrutinised for their benchmark tracking accuracy.
The rating scale mirrors that used by Morningstar analysts for their research and ratings of open-end and closed-end funds:
Gold: Best-of-breed fund that distinguishes itself across the five pillars and has garnered the analysts' highest level of conviction;
Silver: Fund with notable advantages across several, but perhaps not all, of the five pillars-strengths that give the analysts a high level of conviction;
Bronze: Fund with advantages that outweigh any disadvantages across the five pillars, and sufficient level of analyst conviction to warrant a positive rating;
Neutral: Fund that isn't likely to deliver standout returns, but also isn't likely to significantly underperform; and
Negative: Fund that has at least one flaw likely to significantly hamper future performance, and is considered an inferior offering to its peers.
The initial Morningstar Analyst Ratings for index funds in the UK are:
BlackRock Japan Equity Tkr D Acc Bronze
BlackRock Corporate Bond Tkr D Acc Bronze
BlackRock North Amer Eq Tkr D Acc Bronze
BlackRock Overseas Corp Bd Tkr D Acc Bronze
BlackRock Overseas Govt Bd Tracker D Acc Neutral
BlackRock Pacific Ex Japan Eq Tkr D Acc Bronze
BlackRock UK Equity Tracker D Acc Bronze
BlackRock UK Gilts All Stocks Tkr D Acc Bronze
HSBC American Index Retail Acc Silver
HSBC FTSE 100 Index Retail Acc Neutral
L&G All Stocks Idx Linked Gilt Idx I Acc Bronze
L&G Pacific Index I Inc Silver
L&G UK Index Trust I Bronze
Vanguard Emerging Market Stock Idx Inv Acc Bronze
Vanguard EUR Gov Bond Index Inv EUR Silver
Vanguard FTSE Dev Wld ex UK Eq Idx Acc Silver
Vanguard FTSE U.K. Equity Index Acc Silver
Vanguard Global Bd Idx GBP Hdg Acc Bronze
Vanguard Global Stock Idx Inst USD Bronze
Vanguard Japan Stock Idx Inst USD Acc Silver
Vanguard Pacific Ex-Jap Stk Idx Inst USD Silver
Vanguard U.K. Government Bd Idx GBP Acc Silver
Vanguard UK Inv Grade Bd Idx GBP Bronze
Vanguard US 500 Stock Index Ins USD Silver
Vanguard US Inv Gr Crdt Idx Inst USD Bronze
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