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Client Spotlight
How Our Clients Work With Us
We work
hand-in-hand
with major media companies, platforms, exchanges, regulators and other alliances and redistributors to help power their offerings with quality data and content on any scale.
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History of Bringing Clarity and Transparency to Investors
Global
Investor Experience
Report
Complete holdingsStyle boxFund classificationManager and director ownership of fund sharesBetter fee disclosure
Investor
Returns
Star
Ratings & Analyst Ratings
Documents Library
2Slide3
History of Bringing Clarity and Transparency to Investors
Case Studies
Best
practice dialogue from investor
standpoint22 markets – strengths & weaknesses scoredRegulation & taxationDisclosuresFees & Expenses
Sales
&
Media
Graded
in each area rolled up to an overall grade per country
http://corporate.morningstar.com/us/documents/ResearchPapers/GlobalFundInvestorExperience2011.pdf
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Global Investor Experience ReportSlide4
History of Bringing Clarity and Transparency to Investors
Case Studies
Funds
classified by their portfolio risk exposures, with monitoring of holdings, returns and correlations
Recently introduced set of 18 Alternatives categories in Europe to better evaluate OE funds using hedge-fund like strategiesBased on classification expertise from Morningstar hedge-fund researchChallenge: Defining hedge fundsWe’ve just begun offering our classification process expertise to external entities for use with their own classification systemsMonitor fund classifications for the Investment Management Association (IMA), the main UK fund trade association
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Fund ClassificationSlide5
History of Bringing Clarity and Transparency to Investors
Case Studies
Heightened
need for compliance
documentsDemand for cost effective solutionsFulfills these needs with the Morningstar Document LibrarySimplified prospectusesProspectusAnnual reportsSemi-annual reportsTo ease implementation, documents can be accessed via:
Morningstar-branded web interface
Distinct URL links seamlessly embedded within your site for a white label
solution
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Document LibrarySlide6
History of Bringing Clarity and Transparency to Investors
Case Studies
A
single global delivery platform
Document coverage includes Prospectuses, Annual Reports, Semi-Annual Reports, Simplified Prospectus, Factsheets, etc.Investment coverage includes all global investments covered by MorningstarAvailable as a stand-alone delivery or in On Demand/WarehouseDedicated data collection team based in Shenzhen
Local
ongoing support available across Europe
Website
:- http://globaldocuments.morningstar.com/documentlibrary
/
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Document LibrarySlide7
History of Bringing Clarity and Transparency to Investors
Case Studies
A single
, distinct URL provides all the documents associated with that fund
Hyperlinks allow users to jump easily between documents Seamlessly embed our URLs within your site for a white label solution
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Document LibrarySlide8
History of Bringing Clarity and Transparency to Investors
Case Studies
A single location for sourcing all documents
No
client resources neededLeverage Morningstar’s global established data relationshipsBenefit from Morningstar’s global data coverageMulti-lingual document collection capabilities
Simple
client integration via web interface
Global
Morningstar support
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Document Library: BenefitsSlide9
Morningstar’s Relationship with Regulators and Associations
Investment Management Association
Association
of Investment Companies
Financial Conduct AuthoritySwedish Investment Fund Association London Stock Exchange Financial Industry Regulatory Authority
U.S
. Securities and Exchange Commission
Australia
Stock Exchange
Swiss
Fund & Asset Management Association
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Morningstar’s Relationship with Regulators and Associations
IMA Funds
Over 3,000 UK and Offshore (EU) Funds
Over 130 Fund Companies
£757 Billion AUMIMA Sectors37 SectorsDivided into Four Broad Groups: Growth, Income, Capital Protection, and Specialist
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IMA Funds and Sectors
Morningstar
Portfolio Data Process
Acquisition, Identification, and Standardization
IMA
Sector Rules and Methodology
IMA UK Smaller Companies Sector
IMA UK Gilts Sector
Final
Reports
Excel
PDF
IMA Monthly ProcessSlide11
Morningstar’s Relationship with Regulators and Associations
Appointed
to manage the Official NSM in the UK
In
compliance with the European Transparency DirectivePublication of all regulated information publicly listed companies are obliged to release to the marketAnnual Reports, Announcements, Circulars, Prospectuses and significant business eventsDocuments need to be collected and made available to market in a free, easy to access and secure environment
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National Storage Mechanism—Financial Conduct AuthoritySlide12
Morningstar’s Relationship with Regulators and Associations
Issue
Reporting standards materially affect derived asset allocation results
Scope
An increasing number of funds are using derivativesChallengeSome data is available to fund managers onlyDefinition of a broad methodology to handle derivatives consistentlySolutionDefined methodology to handle derivatives
Implement consistent reporting standards
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Portfolio Data – Derivatives Handling CapabilitiesSlide13
Morningstar’s Relationship with Regulators and Associations
Primary Objective:
Identify the economic exposure to each different asset class of each fund
How
Translation of individual derivative holdings into an equivalent portfolio (underlying asset + cash) Pre-requisite = economic market valueAccounting Value = cost to enter/exit positionEconomic Market Value = size of exposureEconomic MV – Cash Offset = Accounting MV (TNA reconciliation)
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Modeling DerivativesSlide14
Morningstar’s Relationship with Regulators and Associations
Provision of statistics for both long and short sides of the portfolio
Classify derivatives according to their underlying asset, rather than classifying derivatives as “Other”
Valuing derivatives at their full economic
exposureChallenge: Transfer agents primarily report nominal values
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Derivatives Handling: OutputSlide15
Morningstar’s Relationship with Regulators and Associations
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Regulatory Developments
Short
selling & CDS
EMIR
/ OTC
MIFID
CRD
II
Solvency
II
Product
Intervention
Capital markets;
Buy-side
;
Tax
Core Fund Regulations
Distribution
UCITS (IV & V)
AIFM
Money
Market
KIID
MIFID
PRIPS
FATCA
Dodd-Frank
(VolckerSlide16
Morningstar’s Relationship with Regulators and Associations
Risk measurement
Have to evaluate the risk inherent in their investment portfolio:
Concentration risk, equity risk, interest rate risk, foreign exchange rate risk
For investments in funds they have to look-thru to underlying securitiesDeconstruct each fundRe-aggregate all holdings to create composite portfolioRun different scenarios to assess solvency requirementData
quality assurance
Accurate, complete and appropriate
Data must be held at a granular
level
Increased
data governanceData
storage
Greater data storage demands on the asset manager
The frequency of reports will move from historic monthly or quarterly to ‘on demand’
Asset managers will have to consider how the delivery platform for these reports
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Solvency II - the operational challengeSlide17
Morningstar’s Relationship with Regulators and Associations
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Solvency II
– likely scenario
Terms of disclosure
Legal Agreements
Data requests
Data requests
CIC Codes are core to Solvency II
regulation
Morningstar can
utilise
our expertise with our Security Master ListSlide18
Morningstar’s Relationship with Regulators and Associations
Huge preparatory workload
Internal
& external workgroups
Multi-discipline cross company projectA lot of time to arrive at consensus interpretation of rulesInitial publication targets have proven over-ambitious1st July came & wentEarly 2012 new target, 30 June is deadlineChallenges of different country implementationsGerman timeline
French AMF category
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KIID: Challenges for Asset ManagersSlide19
Morningstar’s Relationship with Regulators and Associations
Design
Data
provision & calculations
ValidationProductionDistributionArchiving
Overlaid with monitoring local country implementation differences
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KIID: The end to end production processSlide20
Morningstar’s Relationship with Regulators and Associations
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KIID:
ReportSlide21
Morningstar’s Relationship with Regulators and Associations
Material changes must prompt a new KIID to be ready when the change takes
effect (with
the exception of the SRRI)
21KIID: Data Sourcing
Data Point
Source
ISIN
Morningstar
Fund Company
Morningstar
Fund Name
Morningstar
Investment Policy
Morningstar
Risk Indicator
Morningstar
Entry Charge
Morningstar
Exit Charge
Morningstar
Ongoing charges (TER / AMC)
Morningstar
Performance fee
Morningstar
Annual performance bar chart (10 year)
Morningstar
Depositary
Morningstar
Further info
Client
Practical info
Client
Tax statement
ClientSlide22
Morningstar’s Relationship with Regulators and Associations
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KIID: The limitations of fixed SRRI limitsSlide23
Morningstar’s Relationship with Regulators and Associations
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KIID: The currency effect & dangers of oversimplifying risk
All Euro denominated equity, FI & MM fund classes registered for sale in Europe
Source: Morningstar DirectSlide24
Morningstar’s Relationship with Regulators and Associations
Published 1st July 2011 : Supplementary legislation expected mid 2012
Seeks
to regulate non-UCITS
Hedge, private equity, real estate, commodity, infrastructure ….Open or closed endESMA discussion paper in circulation to aid the definitionAims to create a comprehensive and effective regulatory and supervisory framework for AIFMs at the European level. Introduces passport for marketing to professional investors2013 for EU AIFM’s2015 for non-EU AIFM’s, subject to review
Member states retain control of terms for marketing to retail investors
The
legislation will introduce standardized requirements for business involved in the management and administration of alternative investment funds.
Assumes
clear split between portfolio management & risk management
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Alternative Investment Fund Mangers Directive (AIFM)Slide25
Morningstar’s Relationship with Regulators and Associations
Clarity
of investment objectives
Manager disclosure
Trading costs (explicit and implicit)Securities lending programsManager ownership of fund shares
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Future Opportunities for Improved
TransparencySlide26
Client Spotlight
FINRA
Largest independent regulator for all securities firms in the U.S.
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Fully hosted market data solution offering extensive views across all asset classes (Bonds, Options, Equities and Funds
)
Fully hosted market data solution offering extensive views across all asset classes (Bonds, Options, Equities and Funds
)
Tools
and content included:
Market
indices and statistics
Comprehensive
bond data and tools including robust screeners
News
Funds
and Equity Fundamentals
WatchlistsSlide27
Client Spotlight
FINRA
Our web solutions are flexible enough to fit into a company like FINRA’s existing website without sacrificing dynamic capabilities like the instant search results connected to custom data sets within our Screener tool.
Full suite of web solutions across many different investment types
Immediate access to Morningstar’s extensive database onlineCollaborating on a set of newly designed tools
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