Star wars 

Morningstar has a mutual fund rating system consisting of a system of "stars". A mutual fund fund can have one, two up to five stars. 

Although Morningstar itself states that the number of stars should not be used to predict future performance, the star rating is often quoted in newspaper articles and a 5-star rating is often associated with being a top rated mutual fund.

I always tell clients to disregard the Morningstar rating system along with any other rating system as the ratings (other than by chance) may not be predictive in nature. The following articles explores the controversy in more detail regarding Morningstar's star rating system: 

 http://fiduciarynews.com/2013/01/morningstar-star-ratings-do-they-or-dont-they-predict 

 http://fiduciarynews.com/2013/01/have-mutual-fund-rating-agencies-lost-their-mojo/?utm_source=FiduciaryNews&utm_medium=MorninstarRatingsDoTheyorDontThey&utm_campaign=012912z 

Morningstar sells mutual fund data and software to financial professionals and advisers. Long time readers may recall my own dealings with the firm as I took Morningstar to task about their 2009 study giving Canada an "F" for failure regarding mutual fund's internal costs/fees called MERs (Management Expense Ratio). I pointed out some obvious flaws in the research paper. I felt and said at the time that it was inappropriate for Morningstar to release to the press a report that they knew to be seriously flawed. Much to my surprise, Morningstar wrote back and admitted the study was indeed, flawed with respect to Canadian MERs. A clarification article was promised but I never saw one published. 

The press unfortunately, never questioned the source (perhaps they should have) as the flaws appeared to be readily obvious to anyone with even a basic knowledge of the industry. 

The major flaws in the report were presumably corrected but in subsequent reports the Morningstar researchers apparently managed to reach the same conclusion! That original report was in my view, thoroughly discredited and many years later still resurfaces every few months in the business sections of Canada's national newspapers. Therefore, next time one sees yet another perennial "Canada’s MER mutual fund costs are too high" story, I have to bite my tongue.