Morningstar Reports Hedge Fund Performance for April 2009; Asset Flows Through March

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1 Media Contact: Alexa Auerbach , FOR IMMEDIATE RELEASE Morningstar Reports Hedge Fund Performance for April 2009; Asset Flows Through March CHICAGO, May 20, 2009 Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, today reported preliminary hedge fund performance for April 2009 and asset flows through March. The Morningstar 1000 Hedge Fund Index rose 3.4% in April the largest one month-return since January 2006 bringing hedge fund returns into positive territory for The Morningstar MSCI Composite Hedge Fund Index, which hedges U.S. dollar exposure, rose 1.2%, the largest monthly return since October But this positive performance was greatly outstripped by the S&P 500 Index, which increased 9.6% in April, its largest return since March "Over the last two months, the bulls have dominated the markets, and stories of green shoots in the economy colored the financial media. The rally was led by higher-risk asset classes, including small-cap, financial sector, and emerging market stocks, as well as high-yield bonds and leveraged loans. Many hedge fund managers weren't confident in the sustainability of the rally, and invested with a more conservative market exposure," said Nadia Papagiannis, Morningstar hedge fund analyst. U.S. convertible bonds benefited from the trend toward higher-risk, low-credit-quality investments. According to the Merrill Lynch All U.S. Convertibles Index, these securities enjoyed their best month since 1987, with speculative-grade convertibles returning more than double the gains of investment-grade securities. The Morningstar Convertible Arbitrage Hedge Fund Index, the best-performing Morningstar hedge fund index this year, rose 5.1% in April and 12.5% year to date.

2 Also in the lower-quality field, the Morningstar Distressed Securities Hedge Fund Index increased 2.1% in April, the largest since the beginning of the credit crunch in mid In emerging market equities, Eastern European countries produced the best returns in April, although this region is still recovering from its early 2009 nosedive. The Morningstar MSCI Emerging Markets Hedge Fund Index rose 6.7% in April and 7.4% year to date. The only losers in April were the Morningstar Global Trend and Global Non-Trend Hedge Fund Indexes, which dropped 1.7% and 0.5% respectively. A rise in industrial metals such as copper as well as a decline in the U.S. dollar, contributed to some gains for these funds, which capitalize on macro-economic trends, but the overall lack of sustainable trends in many futures contract markets caused net losses for the month. Similarly, the Morningstar Equity Arbitrage Hedge Fund Index ended the month almost flat, at 0.2%. Equity arbitrage funds that attempt to profit from declining volatility rose through much of April, but a temporary increase in volatility mid-month took back some gains. According to Morningstar s database, hedge funds overall continued to show a decline in outflows. In January, investors withdrew more than $29 billion from hedge funds, but February outflows totaled less than $6 billion, while March's preliminary figure showed an even lower amount, at $3.6 billion. Despite the overall March trend of outflows, developed Asia equity hedge funds actually had net inflows of $4.1 billion in March, and investors were rewarded. The Morningstar MSCI Japan Hedge Fund Index increased 2.5% in April, while the broader Morningstar Developed Asia Equity Hedge Fund Index jumped 5.2%. April returns and March asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of May 18, Returns for the Morningstar MSCI Hedge Fund Indexes are based on funds that reported March performance as of May 15, As announced in September 2008, Morningstar is also now calculating hedge fund indexes by applying the MSCI Hedge Fund Index Methodology and Hedge Fund Classification Standard to Morningstar s hedge fund database. These indexes demonstrate the performance of hedge funds to investors who have hedged their currency exposure back into U.S. dollars. The MSCI Hedge Fund Index Methodology classifies hedge funds by investment process, geography, and asset class. Morningstar has more than 8,000 hedge funds and funds of hedge funds in its database. The Morningstar 1000 Hedge Fund Index, a global, broadly representative benchmark for hedge fund performance, has

3 return history from January The index comprises the top 90% of eligible assets in Morningstar s hedge fund database. For the purposes of the index, Morningstar counts funds with shared portfolios as a single hedge fund; funds of hedge funds are excluded from consideration. The index is updated daily for the previous month-end, rebalanced monthly, and reconstituted semi-annually. In addition, Morningstar has 17 category indexes and four broad category indexes based on Morningstar s strategy-specific classification system for hedge funds. Morningstar s hedge fund indexes are not investable. This release is not intended to be an offer or solicitation for the sale of hedge funds. The information is not warranted to be accurate, complete, or timely. When considering hedge funds, investors should consider various risks, including the fact that some products engage in leveraging and other speculative investment practices that may increase the risk of investment loss, can be illiquid, are not required to provide periodic pricing or valuation information to investors, may involve complex tax structures and delays in distributing important tax information, are not subject to the same regulatory requirements as mutual funds, often charge high fees, and in many cases the underlying investments are not transparent and are known only to the investment manager. The high degree of leverage that is often obtainable in trading can lead to large losses as well as gains. Neither Morningstar nor its content providers are responsible for any damages or losses arising from any use of this information. Past performance is no guarantee of future results. About Morningstar, Inc. Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of Internet, software, and print-based products and services for individuals, financial advisors, and institutions. Morningstar provides data on more than 300,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 4 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. The company has operations in 19 countries and minority ownership positions in companies based in three other countries. # # # 2009 Morningstar Inc. All rights reserved.

4 Morningstar Hedge Fund Index Performance April YTD Morningstar 1000 HF PR USD Morningstar Hedge Fund of Funds Morningstar Hedge Fund Category Indexes Morningstar Convtbl Arbitrage HF USD Morningstar Corporate Actions HF USD Morningstar Debt Arbitrage HF USD Morningstar Distressed Sec HF USD Morningstar Dvlp Asia Equity HF USD Morningstar EM Equity HF USD Morningstar Equity Arbitrage HF USD Morningstar Europe Equity HF USD Morningstar Global Debt HF USD Morningstar Global Equity HF USD Morningstar Global Non Trend HF PUSD Morningstar Global Trend HF USD Morningstar Multi-Strategy HF USD Morningstar Short Equity HF PUSD Morningstar US Equity HF USD Morningstar US Small Cap Eqty HF USD Morningstar Hedge Fund Indexes with MSCI Morningstar MSCI Composite AW Morningstar MSCI Composite EW Morningstar MSCI Composite Core Funds Morningstar MSCI Composite Small Fund Morningstar MSCI Developed Markets Morningstar MSCI Directional Trading Morningstar MSCI Emerging Markets Morningstar MSCI Europe Morningstar MSCI Global Markets Morningstar MSCI Japan Morningstar MSCI Multi-Process Group Morningstar MSCI North America Morningstar MSCI Relative Value Morningstar MSCI Security Selection Market Indexes MSCI World USD S&P 500 TR MSCI Europe USD MSCI AC Asia USD MSCI EM USD

5 Hedge Fund Flows By Morningstar Category Mar Flows YTD Thru Mar. Convertible Arbitrage $ (81,088,963) $ (478,378,165) Corporate Actions $ (145,776,982) $ (1,481,938,843) Debt Arbitrage $ (849,640,927) $ (1,751,706,776) Developed Asia Equity $4,086,551,496 $ (105,421,753) Distressed Securities $ (1,380,487,176) $ (3,247,344,080) Emerging Market Equity $ (618,908,774) $ (2,690,945,753) Equity Arbitrage $ (356,093,193) $ (1,806,048,442) Europe Equity $ (42,052,788) $ (2,228,426,965) Global Debt $ (174,360,659) $ (557,573,211) Global Equity $ (881,277,731) $ (4,712,229,883) Global Non-Trend $ (891,756,420) $ (3,228,318,227) Global Trend $250,544,088 $ (2,179,808,059) Multi-strategy $ (1,633,256,602) $ (8,384,975,967) Short Equity $52,377,119 $ 126,725,384 U.S. Equity $ (891,712,844) $ (5,676,927,872) U.S. Small Cap Equity $ (7,490,826) $ (335,373,095) UnClassified $ (8,525,295) $ (31,535,693) Total $ (3,572,956,477) $ (38,770,227,400) Hedge Fund of Fund Flows Fund of Funds - Debt $ (79,358,599) $ (704,736,017) Fund of Funds - Derivatives $ (20,687,780) $ (117,459,618) Fund of Funds - Equity $ (398,380,096) $ (1,090,192,286) Fund of Funds - Event $ 195,804 $ (9,200,396) Fund of Funds - Multistrategy $ (2,242,797,134) $ (3,442,890,552) Fund of Funds - Nondirectional $ 792,609 $ 1,554,934 Total $ (2,740,235,196) $ (5,362,923,935) Hedge Fund Flows By Morningstar Rating Mar Flows YTD Thru Mar. 5-star $ (1,286,222,530) $ (7,189,783,902) 4-star $ (2,349,802,989) $ (13,637,302,562) 3-star $ (1,780,612,183) $ (9,981,343,531) 2-star $ (634,966,818) $ (2,369,621,444) 1-star $ (524,448,315) $ (4,625,931,381) Not-Rated $ 262,456,162 $ (6,331,733,515) Total $ (6,313,596,673) $ (44,135,716,335) - All assets are in U.S. dollar terms - April returns and March asset flows for the Morningstar Hedge Fund Indexes are based on funds that reported as of May 18, Returns for the Morningstar MSCI Hedge Fund Indexes are based on funds that reported March performance as of May 15, 2009.