Morningstar adds categories, asset class

By David Hoffman
August 5, 2008

Morningstar Inc. of Chicago has added two new categories and one broad asset class to its mutual fund classification system.

The two categories are global real estate and currency.

Global-real-estate funds invest primarily in non-U.S. real estate securities but may also include U.S. real estate securities. Such securities include debt and equity securities, convertible securities and securities issued by real estate investment trusts.

At least 40% of the fund’s holdings must be non-U.S. securities.

As of June 30, there were 45 mutual funds and 11 exchange traded funds in this category.

Currency funds invest in U.S. and foreign currencies through the purchase of short-term money market instruments; derivative instruments, including forward currency contracts, index swaps and options, as well as cash deposits. Morningstar ratings are not assigned to the funds in this category, as their strategies vary so widely.

As of June 30, there were eight mutual funds and 26 ETFs in this category.

The broad asset class being added — the alternative-asset class — joins a set of five broad asset classes: U.S. stocks, international stocks, taxable bonds, municipal bonds and balanced portfolios.

The alternative class includes the following categories: currency, long-short, precious metals and bear market.

The new global-real-estate category is assigned to the international-stock asset class.

Morningstar also eliminated the Florida category in the municipal bond asset class because many of the funds in the category have been liquidated or merged with other funds.