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Nadine Youssefnadine.youssef@morningstar.com
Morningstar Launches Open Indexes Project with Free Access to Global Equity Indexes

CHICAGO, Nov. 2, 2016—In response to the escalating cost of market-cap-weighted equity indexes, Morningstar, Inc. (NASDAQ: MORN), a leading provider of independent investment research, has launched the Morningstar Open Indexes Project, offering asset managers and other firms the ability to benchmark their investments against more than 100 Morningstar global equity indexes for free.

As part of the Open Indexes Project, Morningstar is delivering all of its global equity indexes for no cost to asset managers, advisors, asset owners, and other financial services firms for benchmarking purposes. The goal of the project is to lower costs for the industry and improve outcomes for investors. The indexes include equity benchmarks across sectors, styles, and regions. Participants will receive price return, total return, net return, and month-end constituent data for indexes included in the project.

Joe Mansueto, chairman and chief executive officer of Morningstar, said, “Fund investors today are paying substantially lower fees than when we opened our doors more than 30 years ago. One industry cost that’s moving in the opposite direction is the fee charged for indexes used to measure and compare relative investment performance. This benchmarking process is extremely important. But only a handful of index providers control the vast majority of the market, and those providers are using their power to dramatically increase fees.”

According to the Financial Times, 73 percent of U.S. mutual fund assets are benchmarked to an index from one of three firms.

Mansueto added, “Benchmarks are meant to explicitly represent the performance of the underlying markets. As such, we believe market-cap-weighted equity indexes are virtually interchangeable and should be priced accordingly. But they’re not. That’s why we’re embarking on this project.”

Over the years, Morningstar has played a key role in influencing the fund industry to lower investment fees by shining a light on the connection between lower-cost funds and stronger investor outcomes. Now, Morningstar is turning its attention to reducing benchmark data fees.

As part of its initiative, Morningstar has created the Open Indexes Project Advisory Council, a community of 25 firms, including Ariel Investments, Dodge and Cox, Eaton Vance Management, and Guggenheim Investments, committed to driving transparency and accessibility for equity index benchmarking.

Several council members told Morningstar that benchmarking is a top-five data expense for their firms. Nearly half of the members reported that relative to other investment components, benchmark licensing costs have risen dramatically over the past two years. Yet, the majority said they have not changed benchmark providers because of switching costs and other barriers.

Council members also say the biggest barrier to switching index providers is the investment selection “infrastructure” that has been built around the existing index providers—namely brand, platform, and uncertainty around other switching costs.

Mansueto added, “In keeping with Morningstar’s mission to help investors reach their financial goals, the Open Indexes Project offers the industry a new path to lowering costs and ultimately reducing fees charged to individual investors.”

Introduced in 2002, the Morningstar Indexes include a broad range of traditional global equity, fixed income, and commodity indexes that are also combined to form a series of asset allocation indexes. Morningstar also offers active equity indexes that draw on the company’s equity, fund, and asset allocation research. Currently, 54 investment products track Morningstar Indexes globally.

Morningstar Global Equity Indexes include both traditional beta and strategic beta benchmarking. The indexes consist of style, sector, factor-based, dividend, analyst advantage, and global equity. Covering 45 countries and 21 regions, they span global, developed, and emerging markets for 97 percent of the investable universe by market capitalization.

For more information about Morningstar’s indexes, visit http://indexes.morningstar.com. For more information about the Morningstar Open Indexes Project, click here.

About Morningstar, Inc.
Morningstar, Inc. is a leading provider of independent investment research in North America, Europe, Australia, and Asia. The company offers an extensive line of products and services for individual investors, financial advisors, asset managers, and retirement plan providers and sponsors. Morningstar provides data on nearly 540,000 investment offerings, including stocks, mutual funds, and similar vehicles, along with real-time global market data on approximately 18.5 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 $200 billion in assets under advisement and management as of Sept. 30, 2016. The company has operations in 27 countries.

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©2016 Morningstar, Inc. All rights reserved.

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