Morningstar is considering adding another pair of new categories for mutual funds that act like hedge funds. The plans were revealed by Don Phillips, managing director, in an interview with Dow Jones Newswires. Phillips said that the categories will likely cover both market neutral funds and long/short equity funds.

The revelation comes on the heals of Morningstar's creation of a new "bear market" fund category that will track funds using shorting strategies or invest in puts or other derivatives to make bets that stock prices will decline.

Phillips explained that the bear market classification was created in part to ensure that the funds following these strategies did not confuse Morningstar's leader lists. He noted that because the funds follow extreme investment strategies they tend to dominate the list of both the leading and lagging funds depending upon the market environment.

If Morningstar does add the categories, don't look for a long list in each one. There are only about 50 funds that are now using hedge fund tactics, according to Lake Partners.  

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