Under the agreement, Standard & Poor’s will license mutual fund data from Morningstar for use in Standard & Poor’s fund ratings and research products and services.
S&P described the move as an effort to “focus resources on its core analytical services for the global fund industry,” noting that the firm continues to experience increasing demand from wealth managers and leading fund distributors for its independent fund ratings and research, which include fund management ratings, fund research and selection services, and money market and bond fund ratings. The companies expect to complete the transaction in March, subject to customary closing conditions.
“Historical fund data is used as a screen for our fund ratings and research business, but is not core to our business of providing independent qualitative ratings and analysis for the global fund industry,” said Deven Sharma, Executive Vice-President at Standard & Poor’s, in a press release.
Ratings versus Rankings
Standard & Poor’s fund rating is a forward-looking opinion of the quality of a fund’s management, based on an in-depth analysis, qualitative analysis of its investment process and consistency of approach. Standard & Poor’s will continue to build and develop this business. On the other hand, Standard & Poor’s fund ranking is a quantitative assessment of the past performance of a mutual fund compared to that of its peers in its respective style group. Standard & Poor’s fund rankings are part of the mutual fund data business sold to Morningstar.
“Our market-leading qualitative fund ratings and research business has grown significantly over the last few years, specifically our fund management ratings business, which currently rates over 2,200 funds globally,” said Sharma. “As a result, we have ambitious plans to expand the fund ratings and research business by widening the pool of funds that we rate, increasing our research capacity and developing additional distribution channels throughout the world for our market-leading analysis and opinions. Our fund management ratings supplement quantitative historical performance with qualitative fund manager evaluation.”
Global Expansion for M’Star
“With the acquisition of Standard and Poor’s fund data business, we believe we’ll have the most extensive global database for managed investment products in the industry. The combination of Morningstar’s industry-standard investment data and Standard and Poor’s international mutual fund data will significantly strengthen our global database and our offerings to investors,” said Joe Mansueto, chairman and chief executive officer of Morningstar, in a press release . Mansueto also said the transaction would give Morningstar a “much stronger presence outside the United States, particularly in Europe, where Standard and Poor’s has operated for more than 20 years.”