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Monday, May 16, 2022

Active Personalization Is the New Active Investing

Reported by Neil Anderson, Managing Editor

"Active personalization is the new active investing. It blends traditional approaches with more modern ones in a personalized, scalable fashion."

Kunal Kapoor, CEO of Morningstar, put that point front and center this afternoon in his opening keynote remarks at the 2022 Morningstar Investment Conference (MIC) at McCormick Place in Chicago. Kapoor confirmed that, after a smaller MIC last fall, 2,500 people are expected to attend MIC 2022 in-person over the next couple of days. (The event is also accessible virtually.)

Kapoor touched on several themes in his remarks, with personalization linking them all.

"The time is rgith for personalization and personalized conversations with clients," Kapoor said to the advisors attending MIC. "We have the tools ready for you to personalize your practice at scale."

To that end, Kapoor highlighted M*'s push into the direct indexing space. The publicly traded firm bought Moorgate Benchmarks, a European direct indexing shop, last September, and now the M* team is preparing to offer direct indexing capabilities for U.S. FAs to use with their clients.

"We are bringing it to life ... Our pilot program will kick off in June of this year," Kapoor said, adding that the broader program will launch by the end of 2022.

Kapoor describes direct indexing as "the best opportunity" to bring together and address several key client concerns: performance, risk personalization, and sustainability.

Looking ahead, Kapoor hinted at several other upcoming M* developments (including a new M* research portal that will come next quarter to Morningstar Workstation and Morningstar Direct), including improvements on the ratings side of the business. He offered data on the value of M*'s analyst ratings and quantitative ratings (on how highly rated funds perform better on average than lower rated funds), and he noted that M* analysts now rate more than 4,000 funds, while the quant ratings now cover another 140,000 funds.

"Our ratings are living up to the promise of helping investors pinpoint winners," Kapoor said.

Yet Kapoor hints that there is a need to extend those ratings' reach further. He notes that the M* team estimates that within the next five years there will be more than one million investment options for FAs and their clients to choose from.

"That's a lot, and that's a lot of things to put ratings on," Kapoor said. "We're starting to bring together the best of these two ratings systems." 

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