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Dear Clients,
Morningstar is enhancing its global equity classification system, beginning at the industry level and extending up to the sector and super-sector level.
Why is Morningstar making these changes?
Our current sector classification system was created nearly 10 years ago, and since that time, the markets and our clients’ needs have evolved. We believe the foundation of the new equity classification system—economic sensitivity of a company’s revenues—is a better way to break down the investment universe. The new classification system is more intuitive and adds a more global perspective to our research. It also has some important elements in common with the widely used S&P GICS, which simplifies comparison. Overall our revised system is more logical, allows for intelligent diversification, and makes it easier to understand the decisions made by portfolio managers. It presents a robust classification tool in line with both macro-economic factors as well as global market developments.
How are the Industries, Sectors, and Super-Sectors changing?
Broadly speaking, there will be a reduction in the number of Industries and Industry Groups, and a redefinition of the Sectors and Super-Sectors. The new classification system will eliminate 79 current industries and will introduce 14 new industries, resulting in 148 industries. At the industry group level, there will be 69 groups rather than the current 91. There will be 11 Sectors under the new system, and they are being redefined based on their economic sensitivity. The number of Super-Sectors will remain at three, but will also be reworked based on sensitivity to economic cycles.
Download the new Morningstar global equity classification hierarchy
When will the change take place?
New Industry Classifications: October 2010
New industry classifications will be available in the October 2010 release for the following products: Advisor Workstation, Site Builder, Hypothetical Illustrator, Annuity Analyzer, and Portfolio Builder. Principia will be updated with the November 2010 disc (October-ending data). Morningstar Office will also make the change in October 2010.
New Sectors and Super-Sectors: March 2011
New Sectors and Super-Sectors will be available in the March 2011 release for the following products: Advisor Workstation, Site Builder, Hypothetical Illustrator, Annuity Analyzer, and Portfolio Builder. Principia will be updated with the April 2011 disc (March-ending data). Morningstar Office will also make the change in March 2011.
Don’t hesitate to contact me if you have any questions or concerns.
Best Regards,
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Morningstar, Inc. 22 W Washington Street, Chicago, IL 60602 |
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