What Is Morningstar Inc.?
Morningstar is a Chicago-based investment research firm that compiles and analyzes fund, stock, and general market data. They also providean extensive line of internet, software, and print-based products for individual investors, financial advisors, and institutional clients.
The research reaches all corners of the world, includingNorth America, Europe, Australia, and Asia.Among its many offerings, Morningstar's comprehensive, one-page mutual and exchange-traded fund(ETF) reports are widely used by investors to determine the investment quality of more than 2,000 funds.The Motley Fool, for instance, uses them as a chief information source.
Key Takeaways
- Morningstar is an investment research and financial services firm that provides investment analysis, fund ratings, and other professional and investment services.
- Billionaire Joe Mansueto founded Morningstar in 1984 and served as its CEO until 2017.
- In 2022, Morningstar introduced its Wealth Management Solutions group to provide more comprehensive wealth management services in addition to its current offerings.
- Morningstar issues risk ratings for publicly traded mutual funds and exchange-traded funds (ETFs).
- Risk ratings, also known as Star Ratings, range from one to five, with one reserved for the lowest-performing funds and five for the highest-performing funds.
Understanding Morningstar Inc.
Morningstar is a respected and reliable source of independent investment analysis for all levels of fund and stock investors, ranging from inexperienced beginners to sophisticated experts. This extensive line of products empowers various financial professionals, including individual investors, financial advisors, asset managers, retirement plan providers, and institutional investors.
The data and research providedby Morningstar include insights on investment offerings, managed investment products, publicly listed companies, and real-time market data.Its website includes free information on individual funds and stocks.
Complete data is available through subscription services and publications starting at $249 for a one-year membership. Many financial terminals like Bloomberg and FactSetdistribute Morningstar publications.
Morningstar also offers investment management services through its investment advisory subsidiary, with more than $265 billion in assets under management. The company continues to expand into new markets and now operates in 29 countries.
Morningstar’s Initial Public Offering (IPO)
Morningstar filed for an initial public offering in May of 2005 at $18.50 per share. They elected to follow a unique method of issuing public shares calledOpenIPO, similar to Google (GOOGL) in 2004. It is a variation of the traditional method that treats all qualifying bids in an impartial manner. This provides individual investors with equal access to bid on the price of the stock.
Today, Morningstar is listed on Nasdaqunder the ticker symbol MORN. As of Feb. 25, 2022, Morningstar's share price was over $281, and its market capitalizationwas slightlyabove $12.14 billion.
History of Morningstar
In 1984, Joe Mansueto left his job as a stock analyst when he realized investors lacked the necessary information to make intelligent investment decisions. At the same time, the mutual fund industry started to accelerate as retirement plansshifted from defined benefits like company pensions to defined contributions. These changing dynamics informed the foundation of Morningstar.
In 2017, Mansueto stepped down as CEO, passing the torch to Morningstar president Kunal Kapoor. Owning more than half of the company's shares, Mansueto currently serves as its executive chairman.
Outside of Morningstar, Mansueto engages in other business and philanthropic ventures. In 2019, he purchased the Chicago Fire soccer team; and, in 2020, his investment real-estate firm acquired the Wrigley Building and the Waldorf Astoria.
In the beginning, Morningstar covered 400 investments, whereas today, it covers more than 621,370.
Morningstar continues to lead in investment research and management. To offer more comprehensive services to its customers, Morningstar has expanded its operations. In 2022, the company launched its Wealth Management Solutions group, which will integrate its current offerings with a more comprehensive wealth management strategy and platform.
Morningstar Ratings
Morningstar issues risk ratings—called The Morningstar Rating for Funds or Star Rating—for publicly traded mutual funds and exchange-traded funds (ETFs). These ratings help investors make informed investment decisions.
Ratings range from one to five, with one being assigned to the lowest performers and five reserved for the best performing funds. Ratings are applied according to how well the fund performed against others in its category. Funds are grouped according to the types of investments they hold and must have a three-year performance to be rated.
Morningstar considers the volatility of funds and the level of risk undertaken when assigning ratings. Funds that are more volatile tend to have lower ratings than those with less sharp performance fluctuations.
Special Considerations
Morningstar boasts a healthy portfolio of offerings, including professional products, managed investment products, and investor products and services.
The professional product line features data, research, and software to support and strengthen business operations. Included are marketing and reporting solutions, global exchange data, investment planning services, and a host of other products and services. Morningstar also provides rating services for businesses and other financial institutions.
Its managed investment products include Morningstar Indexes, which provide product benchmarking and creation for financial institutions and professionals; Morningstar Managed Portfolios, Advisor Managed Accounts, and other investment management and indexing services.
Individual investors can enjoy analyses of stocks, funds, and markets; portfolio management resources, and newsletters featuring investment strategies and other financial and investment content.
For 2021, Morningstar recorded revenues of $1.7 billion, a 22.3% increase from the prior year; however, net income decreased by 13.6% to $193.3 million. Its revenue drivers include DBRS Morningstar, Morningstar Data, Workplace Solutions, Morningstar Indexes, and PitchBook—a financial data and software company.
How Much Is a Subscription to Morningstar Premium?
Morningstar Premium offers several subscription packages. Members can pay monthly, annually, biennially (every two years), and triennially (every three years). Monthly memberships cost $34.95 per month; annual memberships cost $249, biennial memberships are $399, and triennial memberships are $499.
What Do the Morningstar Stars Mean?
Morningstar rates mutual funds and exchange-traded funds' past performance in relation to other funds within the same category. Ratings range from one to five stars, with one star assigned to the lowest rating and five assigned to the highest.
What Is a Morningstar Sustainability Rating?
Morningstar's Sustainability Rating measures how well mutual funds and exchange-traded funds (ETF) meet environmental, social, and corporate governance (ESG) standards.
Who Are Morningstar’s Competitors?
Morningstar's main competitors include Bloomberg, L.P.; Thomas Reuters Corp., and MarketWatch Inc. Bloomberg is a New York-based media company founded by Michael Bloomberg. Bloomberg provides financial news, market data, and other related content via its news outlet, radio, television, and the Internet. Thomas Reuters Corp. is a Canadian-based media company that provides financial information, market data, and related content to help professionals make informed decisions and operate businesses more efficiently. MarketWatch Inc. is a web-based company that provides financial and market information and analysis.
The Bottom Line
Morningstar is a global investment research and financial services firm that offers a wide array of services and products. Morningstar educates and equips investors and other financial professionals to make informed decisions on investments and in business. Content is either available at no cost or through subscription services. Morningstar continues to expand its offerings to further support its strategy to empower investor success.
