Lipper to Rank Funds by Size, ‘Aggressiveness’

Mutual fund tracking service Lipper Inc. acknowledged Wednesday that its system of classifying and ranking U.S. stock funds is outdated, and it said it plans to adopt a system that some say is similar to that of rival Morningstar Inc.

The change may help investors decide which funds to buy and sell--or it may further complicate a confusing process.

Lipper will now categorize U.S. diversified equity funds based on their size and the “aggressiveness” of the stocks they own, rather than relying on broad descriptions of these portfolios provided by the fund companies.

For instance, funds will no longer be classified as “growth,” “equity-income” or “capital appreciation,” familiar but vague terms that Columbus, Ohio, financial planner Peggy Ruhlin says “we stopped using years ago.”

Instead, the new categories will include “large-cap growth,” “small-cap value,” and so on.

Fund managers, who have expressed concern about being pigeonholed into narrow categories by the fund trackers, now face more categories they can be pigeonholed into. At the same time, “the more boxes or categories you have, the more funds you will have at the top of each category,” said Coral Gables, Fla., financial planner Harold Evensky.