Yesterday I took a look at the harsh takedown Wall Street Journal published about Morningstar’s fund ratings system.
Jeffrey Ptak wrote the official response, which I think makes some important points.
Probably their biggest and best defense is to say, using the WSJ’s own data, that five star funds were less likely to fail than 1 star funds. However, this is intuitive; a 1-star fund gets that ranking because its performance sucked before the fact. Fund companies will shut those products down rather than use marketing dollars to support them. So of course they are more likely to die than a five star fund, which attained its ranking thanks to good historical performance.
Anyway, here it is: