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Description

Morningstar, Inc. (Nasdaq: MORN)is an American financial services firm headquartered in Chicago, Illinois. It provides an array of investment research and investment management services. Joe Mansueto founded Morningstar in 1984.

With operations in 29 countries, Morningstar's research and recommendations are considered by financial journalists as influential in the asset management industry, and a positive or negative recommendation from Morningstar analysts can drive money into or away from any given fund. Through its asset management division, the firm currently manages over $215 billion as of September 30, 2020.

The firm also provides software and data platforms for investment professionals, including "Morningstar Direct" and "Morningstar Advisor Workstation".

History

Founder Joe Mansueto initially had the idea for Morningstar in 1982 while reviewing mutual fund annual reports he had requested from several prominent fund managers. However, it was only after a year working as a stock analyst for Harris Associates, seeing the fund industry and potential competitors up close, that he was convinced that the opportunity was there. Morningstar was subsequently founded in 1984 from his one-bedroom Chicago apartment with an initial investment of US$80,000. The name Morningstar is taken from the last sentence in Walden, a book by Henry David Thoreau; "the sun is but a morning star".

In July 1999, Morningstar accepted an investment of US$91 million from SoftBank in return for a 20 percent stake in the company. The two companies had formed a joint venture in Japan the previous year.

Morningstar's initial public offering occurred on May 3, 2005, with 7,612,500 shares at $18.50 each. The manner in which Morningstar went public is notable. They elected to follow Google's footsteps and use the OpenIPO method rather than the traditional method. This allowed individual investors to bid on the price of the stock, and allowed all investors equal access.

As of February 2015, Joe Mansueto owned approximately 55% of the outstanding shares in Morningstar.

In September 2016, Morningstar announced that it had appointed Kunal Kapoor as chief executive officer, effective January 2017, with Mansueto becoming executive chairman at the same time.

In April 2020, Morningstar announced it had reached an agreement to acquire Sustainalytics, a research and rating firm specialized in environmental, social, and governance (ESG) insights.

Products and services

Morningstar offers a wide array of products and services to both retail and institutional investors.

Morningstar Investment Management

Through its investment management subsidiary, Morningstar currently has over $200 billion in assets under advisement and management.

Morningstar Direct

Morningstar Direct is a software platform that provides data and analytics to help professional investment managers craft new products and portfolios. The product is mainly cloud-based.

Morningstar Office Cloud

Morningstar offers a single end-to-end cloud-based platform for investment advisors, known as Morningstar Office Cloud. The software allows financial advisors to manage their practice, gain access to data and research, analyze investments, and connect with investors.

Morningstar Premium

The firm offers retail and individual investors with access to news, research, and stock, bond, and mutual fund analysis through its 'Morningstar Premium' subscription product.

Credit Ratings (NRSRO)

In 2010, Morningstar acquired Realpoint, LLC, a former division of private-equity giant Capmark Finance and a nationally recognized statistical rating organization (NRSRO). The firm was rebranded as Morningstar Credit Ratings and competes with S&P, Moody's Investors Service, Fitch Ratings and similar Wall Street firms to provide research and ratings of structured debt products, including mortgage-backed securities and asset-backed securities. Today, Morningstar Credit Ratings issues credit ratings on both structured financial products (CMBS, RMBS, CLOs) and corporate/financial institutions.

On May 29, 2019, Morningstar publicly announced its intention to significantly expand the breadth and scope of its ratings business through a $669 million acquisition of DBRS.

Influence and criticisms

Morningstar is considered powerful in the investment management industry, and the firm's ratings and recommendations often influence a fund's assets under management. The firm's "star" ratings are often used by fund managers in marketing materials, and positive star ratings bring a credibility to a fund's strategy. Morningstar's analysts and data are frequently quoted in outlets such as the New York Times, Wall Street Journal, and Financial Times.

In October 2017, the Wall Street Journal published a front-page feature story criticizing Morningstar's influence and questioned the predictive power of the firm's rating system. In response, Morningstar provided a quantitative analysis showing that higher-rated funds outperform lower-rated funds, but cautioned against using the ratings as a definitive marker of future performance.

Corporate identity

Morningstar's current logo was designed by the famed graphic designer Paul Rand. The design features the "o" in Morningstar appearing as a rising sun, which is a nod to a Henry David Thoreau quote that inspired the company's name. Mansueto considers the logo "one of our most valuable assets".

Offices

The firm is headquartered in Chicago, Illinois, with other major regional offices in New York City, London, Hong Kong, Paris, Sydney, Shenzhen and other cities around the world.

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The Bank of America Corporation (abbreviated as BofA) is an American multinational investment bank and financial services company headquartered in Charlotte, wi...

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