Standard & Poor's on Monday will roll out an updated rating system to analyze mutual funds that it says will rely less on the rearview mirror approach on more on the here-and-now.

The new product, which will be available to financial advisors and their clients through S&P's MarketScope Advisor platform, will rank more than 20,000 mutual funds based on a bottoms-up analysis of a fund's underlying holdings using existing S&P equity research tools.

"We think investors should look at the underlying securities in the portfolio to determine if it's undervalued and of high quality," says Todd Rosenbluth, director at S&P's equity research services. "They should also look at other factors such as volatility, expense ratio and turnover."

Past performance will also be a factor, but it won't be a chief determinant of how a fund is ranked. S&P's new rating system will rank funds on a scale of one (lowest) to five (highest). Funds will be ranked by decile within their asset category.

Rosenbluth says S&P will assign ratings for funds with track records of as little as six months, rather than use a minimum three-year performance history that he says is the industry standard.

"We think we can analyze a fund once we have sufficient information about the portfolio," he says.

Fund rankings and price data will be refreshed weekly, as of the close of trading the prior Friday.