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Fund Spy

How Do the Best Funds Treat Shareholders?

Find out where Morningstar comes down in hundreds of new Stewardship Grades.


As assets in mutual funds have dipped over the past year, the fund business has gotten a lot tougher. There may be more temptation for funds to slight shareholders by hiking fees, rolling out aggressive sales tactics, or cutting key investment personnel with the hope of improving revenue. That's why Morningstar Stewardship Grades for mutual funds are just as relevant as ever.

The Stewardship Grades evaluate how well funds care for shareholder capital and are distinct from other ratings, including the Morningstar Rating (aka the star rating). We evaluate funds across five different areas--corporate culture, fund board oversight, manager incentives, fees, and regulatory history. Based on the funds' scores in each section, they each earn an overall grade. As is the case in school, funds earning A's are at the head of the class, while those earning D's and F's have a lot of work to do.

It's important for several reasons to consider stewardship when making an investment decision. First, funds that earn top Stewardship Grades are focused on treating shareholders well. We think investors will have a better experience with their funds over the long term if they're treated like owners--not like just another dollar in the door. More importantly, funds with higher Stewardship Grades tend to outperform those with lower grades, according to a new study by two academics who have no affiliation with Morningstar.

Laura Pavlenko Lutton does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.