Morningstar CEO Kunal Kapoor on Rating Private Assets and Market Convergence

Morningstar's Expansion into Private Asset Ratings

• 💡 Morningstar is expanding its rating services beyond traditional stock and bond funds to include less liquid private asset funds.
• 🧠 This move reflects the growing interest and increasing assets in the private markets, which were historically the domain of institutional investors.
• 🚀 The firm aims to bring its expertise to individual investors, particularly as public assets become a smaller portion of the overall market.

The Rise of Semi-Liquid Investment Options

• 📈 Private credit is a key area seeing significant interest, with the emergence of semi-liquid investment options like interval funds in the US and ELTAs in Europe.
• 🎯 Morningstar sees an opportunity to help investors navigate these new vehicles and understand how to incorporate them into their portfolios.
• 📊 Pitchbook, a Morningstar company, plays a significant role in gathering data on private companies and credit, supporting this expansion.

Convergence of Public and Private Markets

• 🧩 The lines between public and private markets are blurring, leading to new investment vehicles that blend both.
• ⚠️ While some ETFs already contain private assets, a full-on private credit ETF is still an emerging concept, with companies like State Street experimenting.
• 🔍 Morningstar is closely watching innovations in this space, particularly how liquidity mismatches are addressed, especially in stress markets.
• 🤝 The future likely holds more offerings that can hold both public and private assets, allowing managers to select the best opportunities across both.

Morningstar's Position in Credit Ratings

• 🏅 Morningstar is now the world's fourth-largest credit rating agency through Morningstar DBRS.
• 🇨🇦 The firm has a strong presence in Canada, being the premier franchise there.
• ⚖️ Morningstar focuses on areas where transparency and service are highly valued, and where the playing field is more level, such as in private credit ratings.