Profile: Morningstar Inc (MORN.O)
Morningstar, Inc., incorporated on May 16, 1984, is a provider of independent investment research to investors worldwide. It operates in two segments: Investment Information and Investment Management. Through the Company’s Investment Information segment, it offers a range of data, software and research products for individual investors, financial advisors, and institutional clients. It also provides asset management services for advisors, institutions, and retirement plan participants through its Investment Management segment. In addition to its the United States-based products and services, it offers local versions of its products for investors in Asia, Australia, Canada, Europe, Latin America and South Africa. As of December 31, 2011, the Company served approximately eight million individual investors, 250,000 financial advisors, and 4,500 institutional clients. It has operations in 27 countries. In November 2011, the Company acquired 20% interest in YCharts, Inc. (YCharts). In January 2012, the Company acquired 15% interest in HelloWallet LLC (HelloWallet). In May 2013, Morningstar Inc acquired the remaining 76% interest in Morningstar Sweden AB.
As of December 31, 2011, the Company provided data on approximately 375,000 investments, including 31,700 mutual fund share classes in the United States; 91,500 mutual funds and similar vehicles in international markets; 8,800 exchange-traded funds (ETFs); 1,600 closed-end funds; 32,000 stocks; 7,200 hedge funds; 8,100 separate accounts and collective investment trusts; 120,500 variable annuity/life subaccounts and policies; 49,900 insurance, pension, and life funds; 12,100 unit investment trusts, and 4,300 state-sponsored college savings plan portfolios (commonly known as Section 529 College Savings Plans). The Company’s data and analytical tools includes the Morningstar Rating for mutual funds, which rates past performance based on risk- and cost-adjusted returns, and the Morningstar Style Box, which provides a visual summary of a mutual fund's underlying investment style.
The Company has created other tools, such as the Ownership Zone, Sector Delta, and Market Barometer, which allow investors to see how different investments work together to form a portfolio and to track its progress. The Company has developed Portfolio X-Ray tool that helps investors reduce risk and understand the key characteristics of their portfolios based on nine different factors. During the year ended December 31, 2011, the Company introduced Morningstar Analyst Rating. It also offers research and ratings on ETFs, closed-end funds, 529 plans, target-date funds and stocks.
The Company Investment Information segment includes all of its data, software, and research products and services. These products are typically sold through subscriptions or license agreements. The products in this segment include Licensed Data, Morningstar Advisor Workstation, Morningstar.com, Morningstar Direct and Integrated Web Tools. Licensed Data is a set of investment data spanning all of its investment databases, including real-time pricing data, and available through electronic data feeds. Morningstar Advisor Workstation is a Web-based investment planning system for independent financial advisors, as well as advisors affiliated with larger firms. Morningstar.com includes both Premium Memberships and Internet advertising sales. Morningstar Direct is a Web-based institutional research platform.
Integrated Web Tools services help institutional clients build customized Websites or develop their existing sites with Morningstar's online tools and components. Other products within the Investment Information segment include Principia, its compact disk - read only memory (CD-ROM)-based software for independent financial advisors; Morningstar Commodity Data, which aggregates energy, commodity, and financial data from more than 200 sources; equity and corporate credit research, and Morningstar Structured Credit Ratings and Research. The Company also offers a variety of financial communications materials, real-time data and desktop software, investment software for financial advisors and institutions, and investment indexes, as well as several print and online publications. During 2011, 32.8% of Investment Information segment revenue was from outside of the United States.
The Company sells its advisor-related products both directly to independent financial advisors and through enterprise licenses, which allow financial advisors associated with the licensing enterprise to use its products. Its institutional clients include banks, brokerage firms, insurance companies, mutual fund companies, media outlets, and retirement plan sponsors and providers. The Company also has data reselling agreements with third-party providers of investment tools and applications. Licensed Data gives institutions access to an array of investment data spanning a range of investment databases, including real-time pricing data. It offers data packages that include access to its statistics, such as the Morningstar Style Box and Morningstar Rating, and a range of other data, including information on investment performance, risk, portfolios, operations data, fees and expenses, cash flows, and ownership.
Institutions can use Licensed Data in a variety of investor communications, including Websites, print publications, and marketing fact sheets, as well as for internal research and product development. It delivers Licensed Data through a password-protected Website and provides daily updates to clients. During 2011, Licensed Data accounted for 16.9% of its consolidated revenue. Morningstar Advisor Workstation, a Web-based investment planning system, provides financial advisors with a range of tools for conducting their core business, including investment research, planning, and presentations. It allows advisors to build and maintain a client portfolio database that can be integrated with the firm's back-office technology and resources. Moreover, it helps advisors create customized reports for client portfolios that combine mutual funds, stocks, separate accounts, variable annuity/life subaccounts, ETFs, hedge funds, closed-end funds, 529 plans, offshore funds, and pension and life funds.
As of December 31, 2011, 160,287 advisors in the United States were licensed to use Advisor Workstation, which is available in two versions: Morningstar Office for independent financial advisors and a configurable enterprise version for financial advisors affiliated with larger firms. The enterprise version includes four core modules: Clients & Portfolios, Research, Sales/Hypotheticals, and Planning. It also offers a variety of other applications, including tools for defined contribution plans; Morningstar Document Library, which helps firms comply with pre- and post-sale document delivery requirements by providing access to prospectuses and supplements in hypertext markup language (HTML) or portable document format (PDF) formats; Analyst Research Center, which complements the quantitative data in Advisor Workstation with research on stocks, mutual funds, ETFs, and initial public offerings, and Presentation Library, which gives advisors access to client presentation materials. These applications can be purchased as stand-alone products or combined as part of a full Workstation license. Morningstar Advisor Workstation accounted for 12.3% of our consolidated revenue in 2011.
The Company’s Website for individual investors is Morningstar.com in the United States, which includes both Premium Membership revenue (which made up about 60% of Morningstar.com's revenue base in 2011) and Internet advertising sales (which made up the remaining 40% revenue in 2011). As of December 31, 2011, the free membership services offered through Morningstar.com had approximately eight million registered users worldwide, who have access to data on stocks, mutual funds, ETFs, closed-end funds, 529 plans, commodities, options, bonds, and other investments to help them conduct research and track performance. In addition, Morningstar.com features market data, articles, portfolio tools, and educational content to help investors of all levels access investment information.
The Company also offers more than 40 regional investing Websites customized to the needs of investors worldwide. Many of these sites feature coverage in local languages with tools and commentary customized to specific markets. The Company uses its free content as a gateway into paid Premium Membership, which includes access to written analyst reports on more than 1,300 stocks, 1,500 mutual funds, 400 ETFs, 100 closed-end funds, as well as its Portfolio X-Ray, asset allocation and portfolio management tools, stock data, Stewardship Grades, and stock and fund screeners. It offers Premium Membership services in Australia, Canada, China, Italy, the United Kingdom, and the United States. In 2011, it introduced a report format for ETFs; reports for money market funds and preferred stocks; and additional data points for stocks, funds, and closed-end funds.
As of December 31, 2011, the Company had 130,354 paid Premium subscribers for Morningstar.com in the United States plus an additional 15,000 paid Premium subscribers in Australia, Canada, China, Italy, and the United Kingdom. Morningstar.com (including local versions outside of the United States) accounted for 8.6% of its consolidated revenue in 2011. Morningstar Direct is a Web-based institutional research platform that provides research on the range of securities in Morningstar's global database. This platform allows research and marketing professionals to conduct performance comparisons and in-depth analyses of a portfolio's underlying investment style. Morningstar Direct includes access to a range of investment universes, including the United States mutual funds, European and offshore funds, funds based in markets worldwide, stocks, separate accounts, hedge funds, closed-end funds, ETFs, global equity ownership data, variable annuity and life portfolios, and market indexes.
Morningstar Direct had 6,144 licensed users worldwide as of December 31, 2011. Morningstar Direct accounted for 8.3% of its consolidated revenue in 2011. Morningstar Integrated Web tools are services that help institutional clients build customized Websites or develop their existing sites with Morningstar's online tools and components. It offers a range of integrated components, editorial content, and reports that investment firms can license to use to build or develop their Websites for financial advisors and individual investors. The Company also offers licenses for investment research, editorial content, and portfolio analysis tools. Integrated Web Tools can be integrated with clients' existing Websites and allow users to drill down into the underlying data when researching an investment. In 2011, it introduced nine tools for ETFs, including the Total Cost Analyzer, Cost Analyzer, Correlation Analyzer, and ETF Exposure Evaluator. It also integrated fixed-income data and reports into its suite of portfolio components and added a Multiple Fund Comparison tool to its product lineup that allows users to compare and contrast numerous securities side-by-side.
Principia is its CD-ROM-based investment research and planning software for financial planners and had 31,270 subscriptions as of December 31, 2011. The modules offered in Principia provide data on mutual funds, ETFs, stocks, separate accounts, variable annuity/life subaccounts, closed-end funds, asset allocation, hypotheticals, presentations and education, and defined contribution plans. Principia allows advisors to conduct research on client portfolios and includes a three-page Portfolio Snapshot reports that provide a picture of the client's portfolio. Morningstar Commodity Data is a provider of data and analytics for the energy, financial, and agriculture sectors. It provides market pricing data, securities reference data, historical event data, predictive analytics, and data management solutions that help customers manage sets of time-series data. Morningstar Commodity Data collects, unifies, and conducts quality assurance on data from more than 200 sources in the energy, financial, and agriculture sectors and provides clients with one central source for data intelligence and analysis. Clients can also use its tools to analyze their own data. Clients include some of the asset managers, banks, oil companies, power and natural gas trading firms, utilities, risk managers, and agriculture and commodities trading firms. In 2011, it launched a cloud-based solution for delivering commodity and energy market data.
The Company had approximately 150 institutional clients for Morningstar Commodity Data as of December 31, 2011. The Company’s Investment Profiles assemble essential facts about an investment into a report. These one-page reports, available in print or Web format, are designed for use when communicating with clients, as well as for employers to communicate with retirement plan participants. The Company offers Investment Profiles on a range of investments, including mutual funds, stocks, separate accounts, collective investment trusts, variable annuity subaccounts, insurance group separate accounts, ETFs, money market funds, stable value funds, closed-end funds, hedge funds, and private funds. It also offers on-demand publishing for HTML and PDF file formats. It also offers Investment Guides, which are a collection of Investment Profiles, summary information, and educational articles.
Morningstar Credit Ratings, LLC provides timely issue and surveillance ratings and analysis for commercial mortgage-backed securities (CMBS), as well as operational risk assessment services. It also publishes DealView credit reports on CMBS transactions and updates its analysis and forecasts monthly. The Company also offers operational risk assessments that evaluate mortgage servicers, loan originators, and third-party service providers. As of December 31, 2011, the Company offered independent equity research on approximately 2,100 companies worldwide. The Company offers a range of investment indexes that can be used to benchmark the market and create investment products. Its index family includes a series of the United States equity indexes that track the United States market by capitalization, sector, and investment style; a dividend index; a focused stock index capturing performance of moat stocks with the valuations; a series of bond indexes that track the United States market by sector and term structure; global bond and equity indexes; commodity indexes, and asset allocation indexes. Investment firms can license the Morningstar Indexes to create investment vehicles, including mutual funds, ETFs, and derivative securities. In 2011, it introduced a range of indexes focusing on dividend yield, natural resources, hedge funds, Canadian banks, and a Factor Tilt Index slightly weighted toward small-capitalization value stocks.
Investment Management Segment
The Company’s products in Investment Management Segment include Investment Consulting, which focuses on investment monitoring and asset allocation for funds of funds, including mutual funds and variable annuities; Retirement Solutions, including the Morningstar Retirement Manager and Advice by Ibbotson platforms, and Morningstar Managed Portfolios, a fee-based discretionary asset management service that includes a series of mutual fund, ETF, and stock portfolios. Its client base in this segment includes banks, brokerage firms, insurance companies, mutual fund companies, and retirement plan sponsors and providers. It offers investment management services in the United States, Europe, Asia, and Australia. About 15.8% of Investment Management segment revenue was from outside the United States in 2011.
The Company’s Investment Consulting area provides institutional investment advisory and management services for asset management firms, broker/dealers, insurance providers, and investment fiduciaries. It offers Investment Consulting services through Morningstar Associates, Inc., Morningstar Associates, LLC, Morningstar Associates Europe, Ltd, Ibbotson Associates, Inc., Ibbotson Associates Australia Limited, Morningstar Denmark, OBSR Advisory Services Limited and Seeds Finance SA, which are registered investment advisors and wholly owned subsidiaries of Morningstar, Inc. The Company offers advisory services to clients in the United States, Asia, Australia, Canada, and Europe, including insurance companies, investment management companies, mutual fund companies, and broker-dealers. It also provides services for retirement plan sponsors and providers, including developing plan lineups, creating investment policy statements, and monitoring investment performance.
Investment Consulting accounted for 12.4% of its consolidated revenue in 2011. The Company’s Retirement Solutions offerings help retirement plan participants plan and invest for retirement. It offers these services both through retirement plan providers (typically third-party asset management companies that offer mutual funds) and directly to plan sponsors (employers that offer retirement plans to their employees). Clients can select either a hosted solution or its installed software advice solution. Morningstar Retirement Manager is its advice and managed accounts program. The Morningstar Managed Portfolios program is offered through Morningstar Investment Services, Inc., an investment advisor, broker-dealer and wholly owned subsidiary of Morningstar, Inc.
The Company competes with Bloomberg, The McGraw-Hill Companies, Thomson Reuters, Yahoo!, Brinker Capital, Curian Capital, Envestnet PMC, Genworth Financial, Loring Ward, SEI Investments, Symmetry Partners, Mercer, Mesirow Financial, Russell Investments, Wilshire Associates, Financial Engines, Guided Choice, Advent Software, Charles Schwab, EISI, eMoney Advisor, SunGard, Tamarac, Europerformance, eVestment Alliance, FactSet Research Systems, Financial Express, Interactive Data Corporation, Mergent, AOL Money & Finance, Google Finance, Marketwatch.com, The Motley Fool, MSN Money, Seeking Alpha, TheStreet.com, The Wall Street Journal Online, Markov Processes International, PSN, Wilshire Associates, Zephyr Associates, Financial Express, Interactive Data, Markit on Demand, DataGenic, GlobalView, Sungard FAME, ZE Power, Xinnovation, DBRS, Fitch, Kroll, Bond Ratings, Moody's, The Applied Finance Group, Credit Suisse HOLT, Renaissance Capital, Value Line, Zacks Investment Research, Credit Sights, Fitch, Gimme Credit, Barclays Capital, Dow Jones, the Financial Times, Markit and MSCI.
22 WEST WASHINGTON STREET
CHICAGO IL 60602
Company Web Links
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