January 10, 2020

Of the 25% of licensing revenue that comes from asset managers, how much is active vs. passive management? Is there a historical trend in this mix?

Asset managers are important users of Morningstar’s solutions. Our software and data tools are in common use across firms of all sizes and investment strategies—both active and passive. As assets have moved toward passive strategies, so have Morningstar’s business relationships with asset managers that offer passive investments. We have significant relationships with all the top ten providers of passive investment products in the U.S., many of whom also have strong global market positions. Notably, many of these firms also offer active strategies, reflecting the reality that lines today are blurring between active and passive providers. We believe that we are ably positioned to serve the evolving nature and needs of asset managers, including through recently accelerated investments in ESG and our own indexes capabilities.

Both active and passive managers use our software and data for competitive analysis, and to illustrate why their strategies could help investors meet their goals. That said, over the years, we have seen use cases change alongside the popularity of passive management. For example, the data asset managers use to perform peer analysis is different now than historically, with an increasing emphasis of cost as an example, and the rigors of that analysis continues to increase alongside the competitiveness of the industry. These types of changes make our categories and ratings, and other datasets, even more essential for asset managers to make decisions and to highlight their value proposition. With the prevalence of passive products, asset managers are also increasingly focused on portfolio construction activities: both in terms of offering model portfolios that include passive products, as well as providing analytics on how their offerings add value to a portfolio. Our software and reporting solutions are used to support these activities and allow asset management firms to have relevant conversations with their audiences across the globe.

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