Morningstar’s change of approach to private debt
Major research and ratings house Morningstar has reinforced its view on private debt funds, ensuring that two Metrics products are not covered in its latest fixed income wrap.
Morningstar said it had ceased coverage of the Metrics Master Income Trust and the Metrics Direct Income fund noting that the cessation of coverage of the strategies was unrelated to their investment merit but, rather, to a change in approach.
“The rapid global evolution of private market access points and the convergence of public and private market structures led us to review our rating methodology to ensure it effectively captured both the opportunities and risks for investors,” Morningstar said.
“In May 2025, Morningstar launched a dedicated ratings methodology for semiliquid strategies, and we will review private debt strategies under this approach going forward.”
Releasing Morningstar’s year-to-date sector wrap, Morningstar senior analyst Thomas Dutka noted that three strategies had received ratings upgrades, while five had received downgrades.
The downgrades were owed to Morningstar’s reduced confidence in the affected investment team or investment process “or because of enhancements in our ratings system”.
The three upgrades were owed to increased conviction in the investment teams, research capability and/or investment process.
The three strategies to receive upgrades were the Pendal Sustainable Australian Fixed Interest product, the Yarra Enhanced Income Fund and the Perpetual Diversified Income fund.
Those two receive downgrades were Western Asset Global Bond A, Pimco Diversified Fixed Interest W, Schroder Absolute Return Income Fund and Schroder Absolute Return Income Active ETF, Schroder Fixed Income Fund – WC.
Morningstar’s commentary attributed the Western Asset Global Bond A downgrade to staff upheaval, while the Pimco Diversified Fixe Interest W downgrade was attributed to enhancements in Morningstar’s ratings process.
The downgrade of the Schroder Fixed Income Fund WC was attributed to the departure of lead manager and local fixed-income head Stuart Dear
If Metrics were ever to go down…