Morningstar, Inc said it will start to assign ratings to hedge funds and create a global, broadly representative benchmark for hedge fund performance - the Morningstar 1000 Hedge Fund Index. The firm said the new ratings would allow better evaluation and comparison between hedge funds. Like the firm's rating for investment funds, the new rating system for hedge funds uses a scale of one to five stars.

The firm will also create 17 indexes based on the Morningstar Hedge Fund Categories, using a series of quantitative and qualitative measures and not the self-described categories provided by hedge fund managers. John Rekenthaler, vice president of research, said “We want to make researching hedge funds a more transparent process, and our new ratings and indexes will allow qualified investors, advisors, and institutions to better evaluate and compare hedge funds to their peers.” Direct hedge funds with at least 38 months of consecutive performance data would qualify for a rating.

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