Morningstar Joins Race to Provide Direct Indexing Services

(California News Times) - Morningstar is the latest big name to enter the “direct index” field, following in the footsteps of a handful of industry leaders such as BlackRock, Vanguard and Morgan Stanley.

The Chicago-based group operates across credit ratings, investment research and wealth management, and is an indexing specialist focused on developing customized, personalized indexes that are central to direct indexing. We have acquired the Moorgate Benchmark.

concept Investors can create tailor-made portfolios tailored to their personal preferences for investment factors such as value, quality, commitment to vigorous investment and environmental, social and governance (ESG) beliefs. ..

In the United States, direct indexing allows investors to minimize their tax obligations through tax reduction harvesting. Systematically sell lost shares and replace them with similar holdings to offset capital gains taxes paid elsewhere in the portfolio.

A niche service currently available only to wealthy investors, Cerulli Associates predict In the United States alone, the direct indexing strategy will account for $ 4.7 trillion in assets by 2030, accounting for 8% of all assets managed by advisors, up from just $ 300 billion in 2019.

Moorgate CEO Tobias Spronele, head of the Morningstar Index in Europe, said:

“Our kids want more flexibility than we have. They swipe left and right to see exactly what’s in the basket and what’s not. You will want to judge. “

Parametric, a division of the investment group Eaton Vance and a world leader in direct indexing, was acquired by Morgan Stanley last year in an active transaction.

Black lock Acquired Aperio, the second largest in the industry, in November 2020. Vanguard In July, we made the first acquisition in 46 years of history when we acquired Just Invest, a wealth management boutique in California with a customizable direct index service. In June, JPMorgan Asset Management acquired OpenInvest, a fintech platform that facilitates ESG-based portfolio customization.

The acquisition of 20 powerful London and Frankfurt-based companies, Moorgate Benchmarks, also empowers Morningstar to offer a simpler but more lucrative business of offering exchange-traded financial products and other indexes. It is part of the effort to pour. Investment trust.

According to an analysis by Burton-Taylor International Consulting, Morningstar is an indexing minnow, accounting for only 0.6% of the industry’s $ 4.1 billion revenue last year. This is the tenth largest player in the sector, far behind the oligopoly of MSCI, the S & P Dow Jones Index and FTSE Russell.

However, Morningstar has the industry’s highest five-year combined annual growth rate of 43.5%, backed by last year’s acquisition of ESG rating and research provider Sustainalytics and its “attractive pricing model.” I am proud of. Taylor.

Currently, over $ 80 billion of assets are benchmarked against the index by asset managers such as Lyxor, JPMorgan AM and BNY Mellon.

“I think this is an opportunity to defend investors. When talking to clients, I have a lot of complaints about the services offered by some providers and the prices they have to pay,” said Morningstar. Ron Bandi, Managing Director, said. Former CEO of Russell Index Group joined Morning Star in December 2019 to lead the indexing effort.

“We want to be very destructive in this area. Offering extreme value so that investors can leave more money in their pockets.”

The financial terms of the transaction have not been disclosed.


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