August 13, 2021

How much of overall revenue growth would you allocate to the effect of COVID-recovery?

It’s difficult to measure exactly how much of our year-over-year revenue growth was directly related to the economic recovery that followed the onset of the COVID pandemic. In general, the impact that economic expansion or contraction has on global market performance tends to affect revenue growth in our asset-based and transaction-based areas, but market performance isn’t the sole driver of revenue growth in either area.

Global equity markets declined precipitously in early 2020, which impacted our asset-based revenue through Q2 and Q3 2020 as the majority of this revenue is generated from basis points on assets under management or advisement. While global markets have largely recovered and have remained strong so far this year, market performance was not the sole contributor to strong asset-based revenue performance in Q2 2021. Since last year, AUM growth in Workplace Solutions has also been aided by growth in new plans and participants, and new funds being added to existing plans. We’ve also experienced strengthening flows in Managed Portfolios within Investment Management and momentum in Morningstar Indexes as clients continue to seek alternative index providers.

In addition, markets began to tighten starting in the first quarter of 2020, which had an impact on issuance levels in certain structured finance asset classes for DBRS Morningstar. However, we also experienced strength in the volume of Canadian corporate issuance during that same time period, as companies moved to issue or refinance their debt in the wake of lowered interest rates. In the second quarter of 2021, we saw structured finance issuance volumes recover in certain markets, but issuance volumes in Canadian corporate credit also pulled back from record levels.

So while in 2021 we did benefit from positive market conditions relative to the prior-year period (during the height of the pandemic), we also believe that broad-based demand for our products and services contributed to our strong revenue performance in the second quarter of 2021.

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