Long-Term Fund Success Begins With the Parent Firm

Behind the most compelling investment offerings are strong parent firms that attract talent, shape investment culture, and put investors first.

Morningstar has evaluated parent firms for decades, and since 2011, Parent ratings have been a core pillar of funds’ Morningstar Medalist Ratings. Our latest Morningstar Parent Rating Report breaks down what drives these ratings and what shifted in 2025. Highlights include:

• Parent ratings do a good job of picking future winners, thanks to their focus on investment culture and investor-friendly commercial practices.
• Morningstar’s Parent ratings tend to be stable, but 2025 brought movement with upgrades, downgrades, and new additions across all rating tiers.
• Vanguard and Capital Group are two of the largest firms earning High Parent ratings.
• Low fees still win. The least expensive firms delivered the strongest success ratios in following years.

For a deeper look at what strong parents have in common—from manager ownership to product discipline (and even past performance)—get the full report: The Morningstar Parent Rating Report.

The Parent Rating Framework

Parent ratings take a holistic and global view of how a firm cultivates, maintains, and advances two distinct but overlapping elements: investment culture and commercial practice.

A firm’s investment culture includes its ability to attract, develop, and retain talent. The best firms nurture talented portfolio managers and analysts and plan transitions well in advance. Good parents pay their investors in ways that align their interests with fundholders—they compensate managers for delivering returns, not gathering assets—and encourage managers to invest their own money in the strategies they run. Top firms also have appropriate risk-management personnel and tools.

Commercial practices include the less flashy elements of running an asset management business, such as product development, capacity management, distribution, fees, and day-to-day operations. These elements are easy to overlook but critical to investors’ experiences. Good parents keep a close eye on fees, don’t launch new strategies unless they have enduring investment merit, and ensure all areas of the firm are well-staffed.

Senior leadership sets the tone from the top by presenting a clear vision for the firm. This includes strategic overhauls, mergers and acquisitions, daily operations, and brand management. One size does not fit all. A boutique with few employees can be as well-run as an acquisitive global leviathan with thousands on staff. The key is not letting operational issues or poor management impede investors from achieving their investment goals.

Like the other pillars of the Medalist Rating, Parent ratings fall on a five-point scale: High, Above Average, Average, Below Average, and Low.

Morningstar Aims to Cover Best-in-Class Firms

Among other considerations, Morningstar aims to cover those firms and strategies that represent best-in-class approaches within their respective wheelhouses. As such, Parent ratings issued by Morningstar analysts do not follow a normal distribution. Half of the firms Morningstar analysts cover earn Average Parent ratings, and many more parents earn High or Above Average ratings than Below Average or Low ratings.

Morningstar’s Parent ratings also tend to be stable. Of the more than 200 Parent ratings published in 2025, most kept their existing ratings, including those that had High Parent ratings, such as the US’ Vanguard and Capital Group and French boutique Moneta Asset Management.

Morningstar upgraded nearly 20 firms and added another 28 parent firms to coverage in 2025, with ratings spanning from High to Low.

Private-markets titan Blackstone was one of the few firms earning an upgrade to Above Average from Average. Blackstone dominates the semiliquid space as the largest alternative asset manager globally, yet it has shown restraint in product development, limiting some semiliquid funds to qualified purchasers and choosing best-in-class partners Wellington Management and Vanguard to build offerings for advisors and retirement plans.

New additions also included private-markets specialists Bow River Capital, Carlyle, and Cliffwater; these three joined the ranks of firms earning Average Parent ratings. This coverage powers Morningstar’s Medalist Ratings for Semiliquid Funds, which launched in 2025.

What Sets Highly Rated Asset Managers Apart

Firms that earn higher Parent ratings tend to share positive attributes. They create stable, inexpensive fund lineups that garner higher Medalist Ratings and Morningstar Ratings (aka star ratings). They also have more-experienced portfolio managers and higher rates of manager retention, which measures investment team stability.

New in this year’s report is the Average Global Fee Level—Peer Group, which compares each share class’ expenses with its Morningstar Category, management approach (active or passive), and distribution channel peers.

Parent Ratings Have Been a Good Guide to Future Success

Morningstar’s Parent ratings do a good job of pointing to future success, especially over longer periods.

The chart below groups firms according to their Parent ratings as of three points in history—December 2022, December 2020, and December 2015—before averaging their risk-adjusted success ratios over the following three-, five-, and 10-year periods ending December 2025.

The success ratio reflects the percentage of a firm’s funds that both survived and outperformed over a given period. Funds that were live at the beginning of the period but obsoleted before its end are counted as unsuccessful. Funds that survived but underperformed the median peers in their respective categories after fees are also counted as unsuccessful. Funds that launched after the beginning of the period are not included in the calculation.

In December 2015, nearly 30 firms earned High Parent ratings. Over the following 10 years, more than half of those firms’ funds survived and beat peers, on average. One example is Dodge & Cox, which has a near-century-long track record running a compact lineup of valuation-conscious strategies. It has also held the highest Parent rating since the previously named Stewardship Grade methodology rolled up to the parent level in 2007. Over the 10 years ended December 2025, 90% of its funds survived and outperformed relevant peers.

Meanwhile, average success ratios generally declined in line with ratings, and only one-fourth of the lineups of the roughly 200 firms with Average Parent ratings in 2015 met the same definition of success.

Firms With High Parent Ratings Tend to Offer Stability and Lower Fees

Vanguard remains the largest manager of open-end fund and exchange-traded fund assets and maintains its High Parent rating. It continues to grow in terms of assets and the number of clients it serves, powering efforts like its largest-ever round of fee cuts in 2025 and its ambitions to disrupt the bond market through its hallmark: low-cost, straightforward funds.

Second on the list in terms of fund assets is Capital Group, parent of American Funds. Over its 95-year history, Capital Group has stayed true to its long-term approach while thoughtfully expanding to fixed-income and multi-asset investing, public/private partnerships, and model portfolios that blend active and passive investing (through collaboration with Vanguard, BlackRock, and Schwab). Its managers are well-tenured, and its offerings are attractively priced relative to peers.

Low Fees’ Advantage Compounds Over Time

Low fund expenses lead to peer-beating returns. It makes sense because fees come out of a portfolio’s returns, but it is worth reiterating given the magnitude of the effect, especially over longer periods.

Over each of the periods measured, firms that charged the lowest fees achieved the strongest success ratios on average. Over the 10-year period ended December 2025, the most affordable firms posted a risk-adjusted success ratio of 45% on average, while the most expensive firms’ risk-adjusted success ratio was just 21% on average.

For more insights into Morningstar’s Parent ratings and the characteristics that correspond to success, download the full report here.