The Standard Factor Model is the newest iteration of the Morningstar Risk Model. It contains the following seven standard investment factors broadly accepted in the investment industry as being important drivers of risk and return:
Style (or Value/Growth)
Values are calculated monthly based on stocks in the entire global equity universe. Morningstar first calculates a standardized score of stocks’ factor characteristics within an asset class and region. This geographic framework ensures stocks are compared with local peers and that factor characterizations are relevant to local investors. Stock-level factor scores are then aggregated to the fund level using portfolio holding weights. Data must be available for 80% of a fund’s assets for this data to be calculated.
Data from the Standard Factor Model can be seen in the following places in the web-based versions of Morningstar Direct:
The Grid in a data set
The Morningstar Risk Model charts and tables, and
The Morningstar Factor Profile shown on the Morningstar Report
In the Grid, these data points must be added to a custom data set; they do not belong to a pre-built data set. Users can find them by searching for “factor profile.”
Additionally, note that these data points are expressed not as a Z-score (reflecting funds’ standard deviation from mean values in the model) as found in the Risk Model charts and tables, but rather as percentiles within the global equity universe. This makes it easy to understand where a fund ranks both relative to all holdings in the model, and among its peers.
In the Morningstar Risk Model charts and tables (found in the Analytical View), the Standard Factor model can be selected via the Component Settings menu by select Risk Models > Standard Factor Model.
The Morningstar Factor Profile found under the Portfolio section of the Morningstar Report shows an equity portfolio’s exposure to the seven Standard Risk Factors, both past and present for three different time periods. The category average is also shown here.