March 12, 2018

What is the key value proposition for advisors in selling Morningstar Managed Portfolio versus a third-party managed fund, index or ETF? How large can the Managed Portfolios business grow to in terms of AUM and revenue? What advisor products are you predominantly replacing with Managed Portfolios?

We’ve observed increasing demand for outsourced investment management solutions amongst advisors looking to add scale to their practices, ease regulatory burden, and free up time so they can do what they do best, which is building a trusted, personal relationship with their clients. Rather than spending time on asset allocation strategies and sifting through the vast quantities of investment vehicles available today, Morningstar Managed Portfolios offer advisors turnkey portfolios that leverage Morningstar’s independent investment research.

We believe that Managed Portfolios’ key value proposition relative to third-party managed fund/ETF offerings resides with our open architecture. In other words, we have the ability to pick best-of-breed managers to fulfill the mandates within our portfolios, and we are not constrained by the rules-based architecture of an ETF. Rather, we offer active management that leverages a valuation-driven approach to asset allocation within our portfolios. We believe this helps advisors fulfill fiduciary responsibilities, because they can offer our “best thinking” to clients in a manner that is relatively free from constraints. In addition, our Managed Portfolios clients will have exclusive access to our branded Morningstar Mutual Funds, which we plan to launch in the United States in 2018. We believe this lower-cost offering will be even more attractive to advisors and the end investors we jointly serve. From time-to-time, we replace other third-party managed portfolios as we seek to gain share in this growing business.

In 2017, assets under management and advisement in Managed Portfolios expanded by 31.8% to $39.8 billion, which we believe is reflective of the growth investments we made in this business, continued adoption of our offerings in the marketplace, and the overall strength in global markets in 2017. We remain confident in the significant opportunity we have in the U.S. to grow Managed Portfolios, and equally excited about our prospects in Australia, the UK, and South Africa as well.

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