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Morningstar Plans Proprietary Mutual Funds for FAs

March 15, 2017

The mutual fund ratings giant Morningstar has filed with the SEC to launch in-house funds geared toward advisors, Financial Advisor magazine writes.

The nine sub-advised funds will be available on Morningstar’s managed account platform to advisors only, according to the SEC filing cited by the publication. Morningstar claims that moving the funds to its own proprietary platform while still using third-party managers will result in lower costs to investors, Financial Advisor magazine writes.

In addition, the ratings firm says that by staying on its platform, the funds could bring better tax efficiency and ease the portfolio reallocation process, according to the publication. Meanwhile, by allocating assets to multiple managers, Morningstar believes it can get the same exposure normally achieved in a portfolio of 15 to 25 third-party mutual funds with a quarter to a third as many funds, Financial Advisor magazine writes. That in turn will make these portfolios easier to understand for both advisors and investors, Morningstar says in its filing, according to the publication.

Moreover, keeping the funds proprietary will allow for more flexibility in portfolio construction than what’s possible with third-party mutual funds, the company claims, according to Financial Advisor magazine.

Finally, keeping the funds in-house means Morningstar can tap managers who don’t offer mutual funds and thus allow it to offer funds with contrarian investment approaches not possible with third-party funds, according to the SEC filings cited by the publication.

By Alex Padalka
  • To read the Financial Advisor article cited in this story, click here.