Morningstar, Inc. (Nasdaq: MORN), a leading provider of independent investment research, today released the findings from its 2011 Mutual Fund Stewardship Grade research study, which evaluated more than 1,000 funds from more than 40 fund families on how well each fund treats its fund shareholders' capital.

"The results of this study show a very strong correlation between good stewardship of capital and a positive investor experience," said Laura Pavlenko Lutton, editorial director of fund research at Morningstar and one of the authors of the study. "Investors can use the Morningstar Stewardship Grade as a leading indicator of whether a fund will take good care of their money and put fund shareholders' interests first."

The study looked at how funds have performed since Morningstar first issued its Stewardship Grades in 2004 and again after the company revised its Stewardship methodology in 2007. It concluded that funds with high Stewardship Grades (those receiving grades of "A" or "B") are very likely to survive in the long-term, and more likely to provide competitive risk-adjusted returns in the ensuing period.

For purposes of the study, funds are considered successful if they have a Morningstar Rating of three stars or higher, a metric that broadly measures whether a fund's shareholders have fared well relative to peer funds on a risk-adjusted basis. Funds were deemed unsuccessful if they received a Morningstar Rating of two stars or lower or if the funds did not survive.

"While we would never suggest that a fund's Stewardship Grade should be the sole basis for making an investment decision, it can certainly help investors filter their choices," Lutton said. "Funds with top Stewardship Grades are most likely to employ industry best practices and treat fund shareholders like owners, as opposed to treating them like just another dollar through the door."

Morningstar uses five major criteria to arrive at a Stewardship Grade: the corporate culture of a fund's parent organization; the quality of the board of directors overseeing the fund; the fund managers' financial incentives; the fund's fees; and the fund firm's regulatory history. Morningstar analysts assign each component an individual grade, and combine the scores to provide an overall Stewardship Grade.

Funds that are determined to be the best stewards of capital receive an "A" grade, while the worst receive an "F." Morningstar currently assigns Stewardship Grades to more than 1,000 of the approximately 1,750 funds that its analysts actively follow.

The study found that of the funds Morningstar graded in 2004 and 2007:

Almost all--about 99 percent--funds that received "A" Stewardship Grades survived;More than 80 percent of the funds earning grades of "A" or "B" in 2007 had competitive risk-adjusted returns relative to their peers; Approximately one-third of funds receiving an "F" grade in 2004 didn't survive to today; About one-quarter of funds receiving a "D" grade were liquidated or merged away.