Pieter Stalenhoef Explains the Power Behind Morningstar’s Mutual Fund Star Ratings
Morningstar’s mutual fund star rating system is one of the most recognized tools in the investment world. It helps investors quickly assess fund performance based on risk-adjusted returns compared to similar funds in the same category. But how exactly do these star ratings work—and how much should investors rely on them? Financial analyst Pieter Stalenhoef, with years of portfolio management and equity research experience, offers a detailed look into the system: 5 stars go to the top 10% of funds 4 stars to the next 22.5% 3 stars are assigned to the middle 35% 2 stars go to the next 22.5% And 1 star is reserved for the bottom 10% Updated every month, these ratings don’t predict future results—but they do give investors a solid overview of how well a fund has performed in the past, after adjusting for risk and fees. Pieter’s insights come from hands-on experience. At Wells Capital Management, he analyzed global small- and mid-cap stocks across the consumer, media, and healt...