Morningstar Inc.'s revised star ratings of mutual funds have arrived, and over half of the funds rated by the Chicago firm saw their ratings change.

Now, fund watchers are pondering whether some fund firms will see their sales increase or slip as a result of the changes in the methodology used to compute the widely watched ratings of risk-adjusted performance.

Under its revised rating system, Morningstar still awards ratings that range from one to five stars to funds with at least a three-year history. As before, 10% of all rated funds get the top five-star rating and 22.5% get four stars.

The biggest change is that a fund's performance is compared only to that of funds in the same category of stock or bond fund -- such as "large growth" or "intermediate-term bond," rather than to funds in a very broad grouping such as all U.S.-stock funds or all taxable-bond funds.

Morningstar tallied the new and old star ratings of the 20 largest fund families at the request of The Wall Street Journal, making it possible to see which fund firms experienced increases or decreases in the percentage of their funds holding the top five-star or runner-up four-star ratings.

Fund families that saw an increase in the percentage of their rated funds holding those two coveted ratings include Janus Funds (to 57% from 49%), T. Rowe Price Associates (to 63% from 57%), Scudder Funds (to 24% from 19%) and Pimco Funds (to 58% from 53%).

Meanwhile, large fund families seeing a decrease in the percentage of rated funds with those high ratings include Franklin Templeton Investments (to 35% from 52%), American Funds (to 54% from 65%), Van Kampen Funds (to 20% from 29%) and Alliance Capital (to 21% from 30%).

Salomon Smith Barney analyst Guy Moszkowski wrote recently that he "wouldn't expect ratings changes to turn net flows on a dime for any particular fund." But, he continued, "over the course of several months, a significant rating change could very well have a major impact on net flows, particularly in the largest funds."

The Chicago investment research firm revamped its mutual-fund rating system so investors can better distinguish among funds that use similar investment strategies.

The old approach had "an unfortunate side effect," Morningstar senior analyst Christine Benz explained last week on the Morningstar.com Web site. "When a particular style of investing was hot -- like growth was in the late 1990s or deep-value investing is right now -- a disproportionate share of funds within that style received 4 or 5 stars."

Among the immediate results of the new methodology: fewer five-star ratings to bargain-hunting "value" funds and more top ratings to "growth" funds that favor fast-expanding businesses, even though some of those funds have posted big losses over the past few years. As the stars have shifted around, investors will also see some strong-performing small-stock funds shedding top ratings and some weaker-performing large-cap funds seeing higher ratings.

"Value and small-cap companies won't be thrilled at the results, at least for the short term, because nobody likes to lose stars," says Russel Kinnel, Morningstar's director of fund analysis. He adds, however, that the overall response from fund companies to the new system has been positive because they tend to evaluate their own funds based on narrow categories similar to those used by the new rating system.

Morningstar's star ratings have had a significant impact on sales of mutual funds. Funds rated four or five stars -- accounting for about one-third of all rated funds -- absorb a "disproportionate" amount of new business, Mr. Moszkowski says, with about 85% of new money pouring into these funds over the past 10 years.

The Salomon analyst says the latest change may have the effect of further concentrating flows of new money among a small number of funds. Investors now may flock not just to the funds with the most stars, but to those with the most stars in the best-performing categories, he suggests.

Not everybody agrees.

By giving stars to funds in all categories, the new system will provide an incentive to investors and their financial advisers to pay more attention to fund styles that may be currently out of favor, says Avi Nachmany, director of research at Strategic Insight, a New York fund research firm. "This will facilitate asset allocation consciousness," he says. "As a result, the industry as a whole will get more money, and the money will be stickier," meaning more likely to stay put for a long time.

Among the 20 largest fund groups, Vanguard Group now has the highest percentage of its rated funds in five- or four-star territory, 68%, followed by T. Rowe Price at 63%. Under the old system, Vanguard was tied for first place at 65% with American Funds.

The largest fund family, Fidelity Investments, saw its percentage of five- and four-star funds increase slightly, to 47% from 44% of its rated funds, as a result of the change in methodology.