[frgtpsswrdlame]

Hmm, I find this hard to square with Table 2 in the paper. That table illustrates consistent growth in the number of misclassified funds. If, as Morningstar alleges, the difference is in controlling for unrated bonds, that still doesn't close the door to deliberate manipulation on the fund side and misreporting on Morningstar's part. For example they say:

>Because Morningstar’s proprietary methodology for calculating Average Credit Quality particularly penalizes unrated holdings by assigning them a low rating (B or BB)

But if I'm the manager of an investment grade fund, why wouldn't I sneak in some crap quality, high yield, unrated bonds? Morningstar will still rate them within the investment grade universe when they might actually be much lower quality. Then all the same problems that the paper alleges arise, my 'unrated' but basically high yield bonds give me good yield and performance numbers and I get a good Morningstar rating and people flock to buy it and I get a nice tidy bonus at the end of the year.