Leading Independent Investment Research, Morningstar, Inc.

Morningstar

Leading Independent Investment Research

Morningstar, Inc.

Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. We offer an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. 

Morningstar provides data on more than 500,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on more than 16 million equities, indexes, futures, options, commodities, and precious metals, in addition to foreign exchange and Treasury markets. Morningstar also offers investment management services through its investment advisory subsidiaries, with more than $180 billion in assets under advisement or management as of June 30, 2015. We have operations in 27 countries.

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Thematic (Sector/Industry)

United states Financials / Thematic (Sector/Industry)

Since the presidential election, the prospects of easing regulation and lower corporate taxes have lifted the shares of the U.S.-based asset managers. However, we think the industry's path forward is only marginally better, as most of the long-term trends negatively affecting the group are still in place. As we look forward, we believe investors should focus on the following themes for the traditional asset managers: 1) a weaker regulatory environment for financial services firms; 2) distribution channel disruption on the retail-advised side of the business; 3) continuation of the ongoing shift from active to passive products; 4) greater focus on relative fund investment performance and fees; 5) the inevitability of industry consolidation; and, 6) U.S. corporate tax reform. We expect the Trump administration, in conjunction with a Republican-led Congress, to curtail regulation affecting the financial services sector.We expect the Trump administration, in conjunction with a Republican-led Congress, to curtail regulation affecting the financial services sector. But this will do little to alter the long-term trends affecting the asset managers. Poor relative active investment performance and the growth of low-cost index-based products continue to make organic growth challenging, leaving the group dependent on market gains to drive asset levels higher. Rising interest rates will only compound the problem for firms with large retail fixed-income platforms, as market losses on bonds will only amplify fund redemptions. With fees and performance under greater scrutiny, the industry is ripe for fee and margin compression as active asset managers are forced to narrow the spread between the management fees charged for their funds and fees being charge by index-based products, at the same time spending more heavily to improve performance and enhance distribution. Given this environment, we recommend long-term investors focus on wide-moat-rated <a href="https://www.smartkarma.com/entities/6249" target="_blank" data-smartkarma-citation="entities:6249:1">Blackrock Inc (BLK US)</a> , the leading provider of exchange-traded funds (garnering more than 80% of its AUM from institutional clients), and wide-moat <a href="https://www.smartkarma.com/entities/17472" target="_blank" data-smartkarma-citation="entities:17472:1">T Rowe Price Group Inc (TROW US)</a> , which has the best and most consistent active investment performance (and derives two thirds of its AUM from retirement products).Analyst: Greggory Warren

Since the presidential election, the prospects of easing regulation and lower corporate taxes have lifted the shares of the U.S.-based asset managers. However, we think the industry's path forward is only marginally better, as most of the long-term trends negatively affecting the group are still in place. As we look forward, we believe investors should focus on the following themes for the traditional asset managers: 1) a weaker regulatory environment for financial services firms; 2) distribution channel disruption on the retail-advised side of the business; 3) continuation of the ongoing shift from active to passive products; 4) greater focus on relative fund investment performance and fees; 5) the inevitability of industry consolidation; and, 6) U.S. corporate tax reform. We expect the Trump administration, in conjunction with a Republican-led Congress, to curtail regulation affecting the financial services sector.We expect the Trump administration, in conjunction with a Republican-led Congress, to curtail regulation affecting the financial services sector. But this will do little to alter the long-term trends affecting the asset managers. Poor relative active investment performance and the growth of low-cost index-based products continue to make organic growth challenging, leaving the group dependent on market gains to drive asset levels higher. Rising interest rates will only compound the problem for firms with large retail fixed-income platforms, as market losses on bonds will only amplify fund redemptions. With fees and performance under greater scrutiny, the industry is ripe for fee and margin compression as active asset managers are forced to narrow the spread between the management fees charged for their funds and fees being charge by index-based products, at the same time spending more heavily to improve performance and enhance distribution. Given this environment, we recommend long-term investors focus on wide-moat-rated Blackrock Inc (BLK US) , the leading provider of exchange-traded funds (garnering more than 80% of its AUM from institutional clients), and wide-moat T Rowe Price Group Inc (TROW US) , which has the best and most consistent active investment performance (and derives two thirds of its AUM from retirement products).Analyst: Greggory Warren

Sumitomo Mitsui Financial Group (8316 JP)

Mitsubishi UFJ Financial (MUFG) (8306 JP)

Sumitomo Mitsui Financial Group (Sponsored Adr) (SMFG US)

Sumitomo Mitsui Financial Group (Sponsored Adr)

Shanghai Pudong Development Bank Co. (600000 CH)

Mitsubishi UFJ Financial (MUFG) ADR (MUFG US)

China Pacific Insurance (Group) Co., (601601 CH)

U.S. Asset Managers Still Facing a Difficult Future