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Chris Douglas is co-head of fund research with Morningstar.

Today marks an important day for our managed funds research business in Australia, and for those of you who use this research.

In June 2011, we announced a new initiative marking an important evolution for our fund research: a new global Morningstar Analyst Rating for funds. This was the outcome of extensive analysis to identify and codify the strengths of the various fund evaluation methods used by our teams to create one harmonised global system for fund assessment. These new analyst ratings have gone live on morningstar.com.au today.

The foundation for the analyst rating dates back more than 25 years to our firm's early days. Our US analysts have been producing qualitative written research on funds dating back to the late 1980s. Here in Australia, we've been meeting fund managers, writing research reports, and providing clearly-opinionated views on a broad range of fund managers - the good, the bad, and the ugly - for the past 13 years.

Premium Members of this website will probably be familiar with our previous five-point Morningstar Recommendation rating scale, from 'Highly Recommended' to 'Avoid'. From today, these have been replaced by a new scale, from 'Gold' through to 'Negative', as the graphic below illustrates. Having three positive designations - Gold, Silver, and Bronze - gives our analysts greater scope to illustrate their relative conviction.

We also now have two new designations - 'Under Review', and 'Not Ratable'. We'll be using the former when a change at a fund we've rated requires further assessment to determine the impact on the rating, while a fund designated 'Not Ratable' is one where there's insufficient information yet to determine a rating, or where the fund manager has not been sufficiently transparent to enable us to do so.

The analyst ratings are based on assessments of what we've called the 'five key pillars': People, Process, Parent, Price, and Performance. The ultimate view on the individual pillars and how they come together will be driven by the analyst's overall assessment in consultation with an analyst ratings committee.

Morningstar's new analyst ratings are qualitative, forward-looking visual representations of our fund analysts' views of a fund's potential to succeed.

We've explained what the new analyst rating is. But it's also important to reiterate what it's not. First, the analyst rating is not a market call - so we won't be expressing a view on the relative merits of investing in large-cap shares or small-caps, or signalling whether or not it's a good time to be investing in the emerging markets, for example.

The analyst rating is also not meant to replace the individual investor's due diligence process - it can't determine whether a particular fund is the right fit for a particular portfolio need and risk tolerance. The Analyst Rating is intended to supplement decision-making by investors and financial advisers, providing a forward-looking perspective into a fund's potential to succeed.