Morningstar Gives Fiduciary Grades

Morningstar Inc. on Tuesday started grading mutual funds on whether their interests are sufficiently aligned with those of shareholders.

The so-called fiduciary grade rates funds on issues including public disclosure and quality of board oversight. Morningstar is initially offering the grades for about 600 funds and will expand that number in the next several months. The grades won’t affect the five-star rating system for mutual fund performance.

The fiduciary marks come in response to the mutual fund trading scandals and are given on an A-to-F scale, with A being best.

In an example on its website, Morningstar gave the Vanguard 500 Index Fund an overall grade of B. Vanguard Group, the second-largest U.S. mutual fund company, received “good” or “excellent” grades in four of five categories but poor marks for failing to provide information on management incentives.

Sixty-four funds, or 10%, received grades of A. An additional 341, or 54%, got Bs, and 111, or 18%, were given Cs.

Morningstar gave 68 funds Ds and 23 funds Fs.