The Eligible Universe is the first step in the model creation workflow. It defines the pool of securities that the model is allowed to select from before applying security selection, ranking logic, and weighting methodology.
Starting Universe vs. Eligible Universe
The Starting Universe is the broad source universe selected at the beginning of the step.The Eligible Universe is the refined universe that remains after all filters, exclusions, and screens are applied.For example, a user may start with a global point-in-time equity universe, then narrow it by geography, size segment, security type, liquidity, sanctions screens, and discretionary exclusions. The securities that remain after these rules are applied form the final eligible universe.
The Starting Universe defines the broad source universe used as the foundation for the model’s eligible universe.
This section is based on the selected index provider and index universe. BIASafe provides a list of available Morningstar point-in-time indexes that users can search, compare, and select from, including:
Morningstar US Target Market Exposure Index
The Morningstar US Target Market Exposure Index provides broad exposure to the U.S. public equity market across large- and mid-cap stocks. It represents the top 85% of the U.S. investable universe by market capitalization, with eligible stocks weighted by float-adjusted market capitalization. It can be used as a U.S. large- and mid-cap equity starting universe and serves as a benchmark-equivalent alternative to the S&P 500 Index.Index Code: MSUTMETU Coverage: United States Countries: 1 Securities: Approximately 500 Asset Class: Equity Market Segment: Large- & Mid-Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1998
Morningstar US Market Extended Index
The Morningstar US Market Extended Index provides broad exposure to the U.S. public equity market. It represents the top 99.5% of the U.S. investable universe by market capitalization, with eligible stocks weighted by float-adjusted market capitalization. It can be used as a U.S. all-cap equity starting universe and serves as a benchmark-equivalent alternative to the Russell 3000 Index.Index Code: MUMEXTGU Coverage: United States Countries: 1 Securities: Approximately 2,400 Asset Class: Equity Market Segment: All Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1997
Morningstar Canada Domestic Index
The Morningstar Canada Domestic Index provides broad exposure to the Canadian public equity market. It represents the top 97% of the Canadian investable universe by market capitalization, with eligible stocks weighted by domestic float-adjusted market capitalization. It can be used as a Canadian equity starting universe and serves as a benchmark-equivalent alternative to the S&P/TSX Composite Index.Index Code: MSCAUSDG Coverage: Canada Countries: 1 Securities: Approximately 250 Asset Class: Equity Market Segment: All Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1998
Morningstar Developed Markets ex-North America Index
The Morningstar Developed Markets ex-North America Index provides broad exposure to developed public equity markets outside North America. It represents the top 97% of the developed ex-North America investable universe by market capitalization, covering large-, mid-, and small-cap stocks. It can be used as an international developed-market starting universe and serves as a benchmark-equivalent alternative to the MSCI EAFE Index.Index Code: MSDIGUS Coverage: Developed Markets (ex-North America) Countries: 22 Securities: Approximately 2,500 Asset Class: Equity Market Segment: All Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1998
Morningstar Emerging Markets Index
The Morningstar Emerging Markets Index provides broad exposure to emerging public equity markets across large-, mid-, and small-cap stocks. It represents the top 97% of the emerging markets investable universe by market capitalization. It can be used as an emerging markets equity starting universe and serves as a benchmark-equivalent alternative to the MSCI Emerging Markets Index.Index Code: MEMMG Coverage: Emerging Markets Countries: 24 Securities: Approximately 3,800 Asset Class: Equity Market Segment: All Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1998
Morningstar Global Markets Index
The Morningstar Global Markets Index provides broad exposure to global public equity markets across both developed and emerging markets. It represents the top 97% of the global investable equity universe by market capitalization. It can be used as a global equity starting universe for diversified strategies requiring broad worldwide market exposure and serves as a benchmark-equivalent alternative to the MSCI ACWI Index.Index Code: MSGMUSDG Coverage: Global Markets Countries: 48 Securities: Approximately 7,700 Asset Class: Equity Market Segment: All Caps Reconstitution Frequency: Semi Annually Rebalance Frequency: Quarterly Inception Date: June 30, 1998
A point-in-time universe reflects the securities that were available at each historical date, helping reduce survivorship bias and making backtests more realistic.
After selecting the starting universe, users can apply index provider-based segmentation criteria to narrow the universe before applying more advanced eligibility rules.The quick segmentation fields include:
Geographic Scope
Defines the regional exposure of the universe. Available options include North America, Developed Markets excluding North America, or Emerging Markets. Geographic Scope is based on Morningstar Indexes’ market and country classification framework. This allows users to quickly include or exclude broad regional exposures before applying more detailed region, country, exchange, liquidity, or mandate filters.
North America
Canada
United States
Developed Markets ex-NA
Australia
Austria
Belgium
Denmark
Finland
France
Germany
Greece
Hong Kong
Ireland
Israel
Italy
Japan
Netherlands
New Zealand
Norway
Poland
Portugal
Singapore
Spain
Sweden
Switzerland
United Kingdom
Emerging Markets
Brazil
Cayman Islands
Chile
China
Colombia
Czech Republic
Egypt
Hungary
India
Indonesia
Kuwait
Malaysia
Mexico
Morocco
Pakistan
Peru
Philippines
Qatar
Russia
Saudi Arabia
South Africa
South Korea
Taiwan
Thailand
Turkey
United Arab Emirates
Size Segment
Defines the market capitalization segment. Available options include Large Cap, Mid Cap, or Small Cap. Size Segment is based on Morningstar’s portfolio construction methodology for the Global Markets Indexes. This allows users to quickly include or exclude broad capitalization segments before applying more precise size, liquidity, history, sector, geography, or mandate filters.
Large Cap : Represents the largest companies in the selected universe, covering the top 70% of cumulative market capitalization.
Mid Cap : Represents the next layer of companies, covering the range from 70% to 90% of cumulative market capitalization.
Small Cap : Represents smaller companies beyond the 90% cumulative market capitalization threshold, up to the coverage limit.
Cyclicality
Defines the economic sensitivity profile of the universe. Available options include Cyclical, Defensive, and Sensitive. These three categories correspond to the three super sectors under Morningstar’s Global Equity Classification Structure (GECS), which groups sectors according to their economic sensitivity profile. This allows users to quickly include or exclude broad economic segments before applying more detailed sector, industry, liquidity, or mandate filters.
Cyclical
Basic Materials
Consumer Cyclical
Financial Services
Real Estate
Defensive
Consumer Defensive
Healthcare
Utilities
Sensitive
Communication Services
Energy
Industrials
Technology
All available segments are selected by default. Segments that are not supported by the selected starting universe appear disabled. Users can narrow the universe by unselecting the segments they want to exclude.The result is an initial filtered universe that becomes the input for the remaining eligibility rules, exclusion screens, liquidity filters, and mandate constraints.
Eligibility and exclusion rules define which securities are allowed to remain in the universe before the model applies ranking, scoring, and selection logic.
These rules help remove securities that are not suitable for the strategy due to structure, liquidity, classification, regulatory constraints, or mandate restrictions.
The Primary Share Class toggle helps prevent duplicate issuer exposure in the eligible universe.When this setting is active, BIASafe identifies securities that belong to the same parent company using the Parent Company ID. If multiple listed share classes are linked to the same parent company, BIASafe keeps only the primary share class and removes the duplicates from the eligible universe. The primary share class is defined as the listed security with the largest percentage of the parent company’s total outstanding shares.This helps ensure that the model does not unintentionally select multiple securities representing the same underlying company.
Use Primary Share Class when you want the model to treat each parent company as a single investable issuer.This is especially useful for:
avoiding duplicate exposure to the same company
improving universe cleanliness
reducing concentration created by multiple share classes
supporting cleaner ranking, selection, and weighting logic
When this toggle is active, non-primary share classes are excluded before ranking, selection, and weighting are applied.
Security Types allow users to define which instrument categories are eligible to remain in the universe. Securities that do not match the selected security types are removed from the eligible universe.For most equity model portfolios, Common Stock is typically the core eligible security type. Other security types may be included when the strategy mandate allows broader instruments or requires specific exposure.Users can include or exclude security types depending on the strategy mandate.
Morningstar Global Equity Classification Structure (GECS)
GECS organizes companies into a hierarchical structure that helps users understand what a company does, how it generates revenue, and which part of the economy it belongs to.Beyond the three super sectors used in Quick Segmentation, the classification hierarchy used in this section follows three main levels: Sector, Industry Group, and Industry.
Sectors (11)
Industry Groups (55)
Industries (145)
Industry groups are aggregated into 11 sectors. Sectors represent the broadest classification level used in this section and organize companies into major areas of the economy.The 11 GECS sectors are:
Basic Materials
Communication Services
Consumer Cyclical
Consumer Defensive
Energy
Financial Services
Healthcare
Industrials
Real Estate
Technology
Utilities
In BIASafe, sector-level filtering allows users to include or exclude entire areas of the economy when defining the eligible universe.
Industries are grouped into industry groups based on shared operating characteristics.An industry group brings together industries that have similar business models, economic drivers, or operational profiles. If an industry has unique characteristics or does not share enough commonality with other industries, it may be placed in its own industry group.A single-industry group does not necessarily mean that the industry is more important or dominant. It simply means that the industry does not share enough characteristics with other industries to be grouped more broadly.In BIASafe, industry group filtering allows users to apply exclusions at a level that is broader than individual industries but more precise than entire sectors.
Industries are the most granular level of the GECS hierarchy.Each equity is mapped to one industry that best reflects the company’s underlying business activity. This mapping is based on publicly available information about the company, including annual reports, Form 10-K filings, and input from Morningstar Equity Analysts. Additional sources may include company websites, sell-side research, and trade publications.In BIASafe, industry-level filtering allows users to include or exclude very specific business activities without removing an entire sector or industry group.
BIASafe provides two ways to apply these exclusions: Simple View and Advanced View.
Simple View
Advanced View
The Simple View is designed for broad exclusions. Users can select the sectors they want to exclude from the eligible universe. When a sector is excluded, all industry groups and industries within that sector are automatically excluded as well.For example, if the user excludes Energy, all securities classified under Energy, including all related industry groups and industries, are removed from the eligible universe.This view is useful when users want to quickly remove entire areas of the economy without managing detailed classifications one by one.
The Advanced View is designed for more granular exclusions. Instead of selecting only sectors, users can review the full classification table and exclude specific Sectors, Industry Groups, and Industries.The table shows the relationship between each industry, its parent industry group, and its parent sector. This allows users to apply exclusions at the level that best matches their mandate.For example, a user may want to keep the broader Healthcare sector eligible, but exclude one specific industry within it. In that case, the user can use the Advanced View to exclude only the targeted industry instead of removing the entire sector.
Search and Navigation
The Advanced View includes a search bar to help users find specific classifications faster.The search scans across all classification levels, including sectors, industry groups, and industries. Users can search by keyword and then select the matching classifications they want to exclude.This is useful when users are looking for a specific business activity but are not sure whether it is classified as a sector, an industry group, or an industry.
Reset Selections
A Reset button is available in both Simple View and Advanced View.Clicking Reset clears all sector, industry group, and industry exclusions in this section and restores the default selection state.Use this option when you want to restart the classification filter from a clean state instead of manually reselecting each excluded item.
Exclusion LogicExclusions follow a hierarchical logic.When a parent classification is excluded, all classifications below it are also excluded.For example:
Excluding a sector excludes all industry groups and industries within that sector.
Excluding an industry group excludes all industries within that industry group.
Excluding an industry excludes only that specific industry.
If a user later reselects one item within an excluded parent category, BIASafe automatically adjusts the exclusion logic to preserve the user’s more specific selection.For example, if the entire Energy sector is excluded and the user reselects one industry within Energy, the sector-level exclusion is removed. BIASafe then keeps the remaining exclusions at the more granular level, so only the still-excluded industry groups or industries remain excluded.The same logic applies to industry groups. If an industry group is excluded, all industries within it are excluded. If the user reselects one of those industries, the industry group-level exclusion is removed and the remaining exclusions are kept at the industry level.This prevents conflicts between broad and granular selections and ensures that the most specific user choice takes priority.
Users can include or exclude securities based on region, country, or exchange classifications. The geographic classification framework used in BIASafe is based on Morningstar’s Global Markets Index construction rulebook. BIASafe preserves these classifications to support point-in-time universe construction and geographic exclusions.
Morningstar Global Market Classification Framework
Morningstar assigns each security to a country using a rules-based classification process. This classification may consider the company’s country of incorporation, primary listing, business location, revenue exposure, assets, and other factors when required.Morningstar also groups countries into developed and emerging markets across major regions, including the Americas, Asia Pacific, Europe, and Middle East & Africa. These classifications are used by BIASafe to support geographic filtering and market segmentation.
In BIASafe, the geographic hierarchy used in this section follows three main levels: Region, Country, and Exchange.
Regions (8)
Countries (53)
Exchanges (91)
Regions represent the broadest geographic classification level used in this section.They group countries into larger market areas and allow users to exclude entire geographic exposures quickly. The region labels used in BIASafe include:
North America, DNA
Europe (Developed), DEU
Europe (Emerging), EEU
Asia-Pacific (Developed), DAP
Asia (Emerging), EAS
Latin America & Caribbean, ELA
Middle East & Africa (Developed), DMA
Middle East & Africa (Emerging), EMA
In BIASafe, region-level filtering allows users to include or exclude entire geographic areas when defining the eligible universe.
Countries represent the second level of the geographic hierarchy.Each country belongs to a provider-defined region and is identified by its country code. Country-level filtering allows users to exclude a specific country while keeping the rest of the region eligible.For example, a user may keep Europe (Developed) eligible while excluding one specific country within that region.The available countries depend on the selected starting universe and Morningstar’s country classification methodology. For the full list of countries currently available in the selected universe, refer to the Quick Segmentation section.In BIASafe, country-level filtering is useful when the strategy mandate allows broad regional exposure but restricts certain markets due to client preferences, operational constraints, regulatory considerations, or investment policy limits.
Exchanges represent the most granular level of this geographic hierarchy.Each exchange is associated with a country and is identified by an exchange code. Exchange-level filtering allows users to exclude securities listed or mapped to a specific trading venue without excluding the entire country.For example, a user may keep United States eligible while excluding all OTC venues, or keep China eligible while excluding securities mapped to a foreign listing venue.Exchange classifications are provider-sourced and may reflect listing venue, trading venue, ADR mapping, cross-listings, or historical security-level market mappings.In BIASafe, exchange-level filtering is useful when users need more precise investability or market-access controls.
BIASafe provides two ways to apply these exclusions: Simple View and Advanced View.
Simple View
Advanced View
The Simple View is designed for broad geographic exclusions. Users can select the regions they want to exclude from the eligible universe. When a region is excluded, all countries and exchanges within that region are automatically excluded as well.For example, if the user excludes Asia (Emerging), all countries and exchanges classified under that region are removed from the eligible universe.This view is useful when users want to quickly remove entire geographic areas without managing countries or exchanges one by one.
The Advanced View is designed for more granular geographic exclusions. Instead of selecting only regions, users can review the full geographic table and exclude specific Regions, Countries, and Exchanges.The table shows the relationship between each exchange, its parent country, and its parent region. This allows users to apply exclusions at the level that best matches the strategy mandate.For example, a user may want to keep the broader North America region eligible, but exclude one specific exchange within that region. In that case, the user can use the Advanced View to exclude only the targeted exchange instead of removing the entire region.
Search and Navigation
The Advanced View includes a search bar to help users find specific geographies or trading venues faster.The search scans across all geographic levels, including regions, countries, and exchanges. Users can search by keyword, country name, exchange name, or exchange code, then select the matching items they want to exclude.This is useful when users are looking for a specific market or exchange but are not sure where it sits within the regional hierarchy.
Reset Selections
A Reset button is available in both Simple View and Advanced View.Clicking Reset clears all region, country, and exchange exclusions in this section and restores the default selection state.Use this option when you want to restart the classification filter from a clean state instead of manually reselecting each excluded item.
Exclusion LogicExclusions follow a hierarchical logic.When a parent geographic category is excluded, all categories below it are also excluded.For example:
Excluding a region excludes all countries and exchanges within that region.
Excluding a country excludes all exchanges within that country.
Excluding an exchange excludes only securities listed or traded on that specific exchange.
If a user later reselects one item within an excluded parent category, BIASafe automatically adjusts the exclusion logic to preserve the user’s more specific selection.For example, if the entire North America region is excluded and the user reselects one country within North America, the region-level exclusion is removed. BIASafe then keeps the remaining exclusions at the more granular level, so only the still-excluded countries or exchanges remain excluded.The same logic applies to countries. If a country is excluded, all exchanges within it are excluded. If the user reselects one exchange within that country, the country-level exclusion is removed and the remaining exclusions are kept at the exchange level.This prevents conflicts between broad and granular selections and ensures that the most specific user choice takes priority.
This section allows users to apply additional investability filters before the model moves to security selection and weighting. These filters are used to remove securities that may be difficult to trade, too small for the intended mandate, or too recent to support reliable historical analysis.The filters are optional. If no range is set, BIASafe keeps the full available range for that field.
Liquidity filters help define whether a security is practical to include in the eligible universe. They are especially important for strategies that may later be deployed in production, where trading capacity, execution quality, and market impact matter.
Price Range allows users to set a minimum and maximum security price. This can be used to exclude very low-priced securities, penny stocks, or securities outside the acceptable price range for the strategy. When a price floor is applied, securities below that price are removed from the eligible universe.
Recommended minimum:US$5.00 Recommended maximum:NoneA minimum price floor of US$5.00 is commonly used to exclude very low-priced securities and penny-stock-like names. Under SEC Rule 3a51-1, the U.S. penny stock framework uses a US$5.00 price threshold as part of its definition and related exclusions.In BIASafe, this threshold can be used as a practical investability screen, especially for U.S. equity strategies or global strategies where very low-priced securities may introduce liquidity, volatility, or execution concerns.
Average Dollar Volume (USD): Screen for trading liquidity
20-Day Average Dollar Volume measures the average daily trading value of a security over the most recent 20 trading days, which is approximately one trading month. It is calculated using price and traded volume, making it a practical measure of liquidity.Users can set a minimum threshold to exclude securities with insufficient trading activity. This filter is useful when the strategy requires securities that can be traded with reasonable execution capacity.
Recommended minimum:US$1 million Recommended stricter minimum:US$5 million to US$10 million Recommended maximum:None20-Day Average Dollar Volume helps exclude securities with limited trading activity.A US$1 million minimum can be used as a broad liquidity screen for research portfolios. For more investable or production-oriented strategies, users may apply a higher threshold, such as US$5 million or US$10 million, depending on portfolio size and expected trade volumes.
Free Float (%): Assess public share availability
Float % measures the percentage of a company’s shares that are freely available for public trading. A low float may indicate that a large portion of shares is held by insiders, strategic investors, governments, or controlling shareholders.BIASafe applies this filter using the selected starting universe provider’s float data, which reflects Morningstar’s free float calculation methodology.Users can apply a float threshold to exclude securities with limited public availability or weaker investability.
Recommended minimum:15% to 25% Recommended maximum: NoneFloat % helps exclude securities with limited public availability.A minimum free float threshold can reduce exposure to securities where a large share of ownership is held by insiders, governments, founders, or strategic shareholders. For most broad equity strategies, a 20% minimum float range is a reasonable starting point.
Size filters help define whether a security fits the intended scale and capacity profile of the strategy. They are especially important for controlling exposure to smaller companies, aligning the universe with the mandate, and avoiding securities that may be too small for efficient implementation.
Market Capitalization (USD): Control strategy capacity
Market Capitalization allows users to set a minimum and maximum market cap range. This provides more precise control than the broad size segmentation selected earlier in the workflow. For example, a user may select Large Cap in the quick segmentation section, then apply a specific market capitalization floor to enforce a stricter investability threshold.
Recommended minimum:
US$300 million for small-cap inclusive strategies
US$1 billion for more investable broad equity strategies
US$5 billion for large-cap focused strategies
Recommended maximum:NoneMarket Cap helps align the eligible universe with the intended size profile of the strategy.A lower threshold may be appropriate for all-cap or small-cap strategies. A higher threshold may be preferred for strategies intended to support greater capacity, lower trading impact, or institutional implementation.
History filters help define whether a security has enough trading history to be included in the eligible universe. They are especially important for avoiding newly listed securities with limited data, unstable liquidity, or early post-listing behavior that may distort backtest results and portfolio construction.
Listing History (Days): Avoid newly listed securities
Listing History allows users to require a minimum number of days since a security became listed or available in the data. This can be used to exclude newly listed securities with limited trading history, insufficient backtest data, or incomplete historical records.
Recommended minimum:252 trading days Alternative minimum:90 to 180 calendar days for more flexible mandates Recommended maximum:NoneListing History helps exclude newly listed securities with limited trading record or incomplete historical data.This filter can also help reduce exposure to the IPO anomaly, where newly listed securities may experience unusually volatile performance, temporary mispricing, limited float, lock-up effects, short trading history, and unstable liquidity during the first months after listing. By requiring a minimum listing history, users can avoid adding securities too early, before their trading patterns and market participation have become more established.
Filter Combination LogicLiquidity, size, and history filters are cumulative.They are not mutually exclusive and do not replace the filters applied in other sections. Instead, each active filter adds another eligibility condition to the universe.A security must pass all active filters to remain eligible.For example, if the user applies:
Geographic Scope: North America
Security Type: Common Stock
Price Floor: US$5.00
Minimum 20-Day Average Dollar Volume: US$1 million
Minimum Market Cap: US$1 billion
Listing History: 252 trading days
then a security must satisfy every one of these conditions to remain in the eligible universe.If a security fails any active filter, it is excluded before the model moves to security selection and weighting.This means the final eligible universe is the result of all applied quick segmentation rules, classification exclusions, geography filters, liquidity filters, size filters, history filters, and mandate screens working together.
Compliance & Policy Screens allow users to apply predefined restriction lists and mandate-based screens when defining the eligible universe. These screens may include sanctions, regulatory restrictions, ESG exclusions, values-based policies, Shariah compliance rules, or client-specific investment restrictions.
Manual Security Overrides are used when a mandate requires specific securities to be explicitly excluded or included, regardless of the results produced by the selected universe, classification, geography, liquidity, size, or history filters.BIASafe provides two override modes: Exclusions and Inclusions.
Exclusion List
Keyword-Based Exclusions
Exclusions remove specific securities from the eligible universe.
Users can exclude securities directly by searching for a ticker or company name. Once added to the Exclusion List, the security is removed from the eligible universe even if it satisfies the other selected screens.
This is useful when a mandate requires certain companies to be restricted for client, compliance, policy, or discretionary reasons.
The benchmark section defines the reference indexes or ETFs used to evaluate the model.By default, BIASafe automatically adds the same index selected as the starting universe. This default benchmark is locked because it represents the primary reference universe used to construct the eligible universe. It cannot be edited or removed. Users can however add additional benchmarks by using the search bar and selecting another index or ETF.
Benchmarks selected in this section are used for more than performance comparison. They may also support benchmark-aware construction and analytics, including benchmark-based weighting, relative metric calculations, active exposure analysis, tracking error analysis, and other benchmark-relative measures.In practice, this means the selected benchmarks can affect both how the model is evaluated and how certain model rules are calculated when benchmark-relative methods are used.
North America
Large Cap : Represents the largest companies in the selected universe, covering the top 70% of cumulative market capitalization.Mid Cap : Represents the next layer of companies, covering the range from 70% to 90% of cumulative market capitalization.Small Cap : Represents smaller companies beyond the 90% cumulative market capitalization threshold, up to the coverage limit.
Cyclical
