CHICAGO, March 15, 2012—Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today announced that Roger Ibbotson, Peng Chen, and Kevin Zhu received the Graham and Dodd Scroll Award from the CFA Institute Financial Analysts Journal (FAJ) for the research paper, “The ABCs of Hedge Funds: Alphas, Betas, and Costs,” published in the January/February 2011 issue of the FAJ. This is the ninth Graham and Dodd Award or Graham and Dodd Scroll Award granted for financial writing to employees of Morningstar or its subsidiary Ibbotson Associates.
In the paper, Ibbotson, Chen, and Zhu examined whether or not hedge fund managers, on average, produce returns that justify their fees. They adjusted hedge fund return data for biases and then broke down the returns into alpha (portion of return generated by the manager), beta (portion of return generated by the markets), and cost (portion of return that goes to fees). The authors found that the average hedge fund manager produced significantly positive alpha during the time period studied and that the average hedge fund manager added value in both bear and bull markets. The complete paper can be found on the CFA website.
“Despite the growing mainstream use of hedge funds, they’re largely unregulated, which makes accurate measurement of performance difficult. They are also generally more expensive than traditional investments, so it begs the question of whether the performance justifies the cost,” said Joe Mansueto, chairman and chief executive officer of Morningstar, Inc. “This work sheds light from a historical performance perspective on an opaque area of the market, and allows investors to make more educated decisions. We are thrilled that Roger, Peng, and Kevin have been recognized with this most prestigious honor for their contributions to the field.”
Roger Ibbotson, Ph.D., is founder of Ibbotson Associates, professor of finance at Yale School of Management, and partner at Zebra Capital Management. Morningstar acquired Ibbotson Associates in 2006 and Roger Ibbotson serves as a management advisor to Morningstar. Peng Chen, Ph.D., CFA, is president of Morningstar’s global Investment Management division. Kevin Zhu, Ph.D., previously worked for Morningstar as a senior research consultant.
Awarded by the FAJ’s Advisory Council and Editorial Board, the Graham and Dodd Scroll Award is given in recognition of excellence in research and financial writing. The FAJ is published six times a year by CFA Institute, the worldwide association of more than 105,000 securities analysts, portfolio managers, strategists, consultants, and other investment specialists. The Journal advances the knowledge and understanding of the practice of investment management through the publication of high-quality, practitioner-relevant research. The Graham and Dodd Awards were established in 1960 to recognize excellence in financial writing and to honor Benjamin Graham and David L. Dodd for their enduring contributions to the field of financial analysis.
About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individuals, financial advisors, and institutions. Morningstar provides data on approximately 375,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 8 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its registered investment advisor subsidiaries and has more than $180 billion in assets under advisement and management as of Dec. 31, 2011. The company has operations in 27 countries.
