Morningstar announced today that 1) they'll start ranking ETFs and 2) they're adding several new categories.
Besides the new ETF rankings, Morningstar today also is launching five new mutual-fund categories, including "long-short" funds, which make money by betting that some stocks will rise in price while simultaneously betting that others will fall, and "target-date" funds, which automatically adjust the fund's asset allocation in order to meet investors' specific retirement date.
The bad news for Morningstar is that they're still going to use the Size-Value-Growth grid for ETFs, when there's no reason to think that they'll work any better for ETfs than for regular mutual funds.
The problem with Size-Value-Growth is that it unnecessarily constricts managers' decision-making. When a "value" or "growth" manager sees a stock, it rarely matters what size it is. Likewise, rating companies can't agree on what "value" and "growth" actually mean. A stock that a growth manager finds attactive might remain beyond his reach, because S&P considers it a value stock. Given their druthers, virtually no managers would actually make decisions this way. Moreover, the Nine Boxes don't define asset classes, so diversifying across them doesn't significantly help a portfolio.
The interesting news here is that the new categories are based on actual style, i.e., criteria that managers use when deciding where to put their money. It's perhaps evidence that Morningstar is trying to diversify its own portfolio of rankings. The question is whether or not managers, advisors, consultants, and investors are so invested in the current SVG "style" grid that Morningstar can wean itself from the giant Stay-Puft Marshmallow Turkey it's created.