March 12, 2018

What do you envision as the long-term growth potential of this market (data & services into the investment management industry) and as Morningstar's share in that market?

According to the latest report published by Burton-Taylor International Consulting, global spend for financial market data/analysis exceeded $27 billion in 2016. Comparing our size today ($911.7 million in 2017 revenue) against the size of the market suggests that we have ample prospects for winning new business. We’ve identified three major industry trends that provide us opportunities to grow market share over the long run. First, we expect that the ongoing digitization of the financial services industry will support demand for Morningstar’s products and services. Our history of infusing our data with our intellectual property positions us well to help individual investors, advisors, and asset managers realize the benefits of Big Data and analytics in their operations and investment strategies. For example, our global risk model allows clients to run scenario analyses that can quantify the impact of simulated events on their portfolios, and we’ve only just scratched the surface with exciting innovations like real-time data sets. Second, we believe that the global regulatory environment is demanding greater transparency and governance within global markets. We’re confident that the investments we make to further enhance our data, research, and analytical tools will help our clients meet the unique challenges posed by an evolving regulatory landscape. Third, the shift from high-cost active management to low-cost passive investment vehicles continues to be a major driver of change in our industry. In this environment, fee compression is causing some of our clients to be more cost-conscious. As we continue to expand our datasets and enhance our solutions capabilities, we help our clients save money when they consolidate their spend with us. Furthermore, although we believe that reasonably-priced active management will always have a place, we’ve added to our data and service offerings in response to increasing investor preference for passive vehicles by enhancing our data and analytics around ETFs. We’ve also diversified our offerings by adding capability in other areas of importance for investors, such as expanding our fixed income data and analytics, building solutions in multi-asset and goals-based investing, offering environmental, social, governance (ESG) ratings, and adding coverage on private capital markets through PitchBook.

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