After 10 years, the average performance spread between one-star and five-star rated funds converges dramatically, the newspaper reported. After a fund receives a one-star rating, it ascends to an average rating of 1.9 stars after 10 years. A fund that receives a three-star rating descends to an average rating of 2.5 stars after 10 years. A top-rated five star fund, on the other hand, descends to an average rating of three stars a decade later, the story said.

Morningstar acknowledged that the star ratings were “backward-looking” measures with only “moderately predictive” value; the firm argued the Wall Street Journal’s research showed evidence of that value.

“We’ve encouraged users to consider combining the star rating with other data and measures to aid in fund selection,” wrote Ptak. “In this way, users could benefit from some of the star rating’s more distantly valuable features—that is, the way it emphasizes longer time frame changes, accounts for risk and measures performance after fees and charges, considerations that don’t usually figure into “leaders and laggards” tallies—while leveraging other forward-looking measures like the Morningstar Analyst Rating.”

Morningstar's analyst rating system, which awards funds a gold, silver, bronze, neutral or negative rating based on a qualitative review conducted by the firm’s analysts, was also criticized by the the report.

The newspaper found that qualitative analyst ratings were somewhat predictive of future quantitative performance, but not dramatically: Funds awarded a gold medal, for example, ended up with an average rating of 3.4 starts after a five-year period. Silver-medal funds ended up with an average of 3.3 stars after the same time period, while bronze funds had an average rating of three stars.

Morningstar accused the Journal’s analysis of comparing apples to oranges.

“We had counseled the Journal against using the star rating as a measure of the analyst rating’s predictiveness for a simple reason: The star rating is based on funds’ trailing risk- and load-adjusted returns versus category peers,” wrote Ptak. “When analysts are assigning analyst ratings, they’re not taking loads into consideration, so there’s a mismatch of the two, a point we made to the Journal in urging them to reconsider the star rating in favor a risk-adjusted measure like CAPM alpha.”