Morningstar will launch a rating system for alternatives to mutual funds such as commodities and real estate investment trusts for 401(k) plan sponsors and advisors. John Rekenthaler, v.p. of research, said the rating system will be similar to the one used for collective investment trusts. Both are scheduled to roll out early 2007. He said plan sponsors' growing appetite for alternatives to mutual funds motivated Morningstar to come up with new rating systems.

Morningstar currently compares CITs to separately managed accounts, using gross returns to provide a quarterly rating. Rekenthaler said under this new framework, investors and advisors will be able to more accurately compare nontraditional investments to mutual fund offerings in retirement plans and will have access to timelier, more transparent information.

Rekenthaler said there will be two versions of the system. One for plan sponsors looking to track their current or prospective choices and another for 401(k) advisors who assist plan sponsors in choosing options. He said the prices for the systems will vary based on what the clients use them for.