Welcome back to the Alt Goes Mainstream podcast.
Today’s podcast was a conversation that was recorded live at Morningstar’s Investment Conference in Chicago earlier this year.
Morningstar CEO Kunal Kapoor took time out of his packed schedule at the event to sit down with me for a thought-provoking conversation that dove into the nuances of many of the trends that are shaping private markets today.
Morningstar and Kunal have quite an interesting perch in the market. They occupy a critically important function in the market: helping investors understand the data, structures, and trends in public and private markets. They provide fund ratings, investment analysis, and market data to both individual and institutional investors.
As public and private markets experience increasing convergence, Morningstar finds itself at the intersection of markets that are undergoing rapid evolutions across product structures, asset allocation frameworks, and weighty questions around conceptual frameworks of liquidity, risk, volatility, concentration that are on the minds of many. Amongst the wide range of topics Kunal and I covered, one stood out: Morningstar is fiercely on the side of the investor.
If there’s anyone who has a deep understanding of Morningstar’s DNA, it’s Kunal. Kunal started at Morningstar in 1997 as a data analyst, holding a variety of roles at the firm, including leadership positions in research and innovation. He served as director of mutual fund research and was part of the team that launched Morningstar Investment Services, Inc., before moving on to other roles including director of business strategy for international operations, and later, president and chief investment officer of Morningstar Investment Services. During his tenure, he has also led Morningstar.com® and the firm’s data business as well as its global products and client solutions group.
Kunal and I had a fascinating and lively conversation. We covered a number of the most pressing topics in private markets today: the convergence of public and private, liquidity vs illiquidity, investor education, the importance of transparency, and the why, what, and how behind evergreen funds.
Thanks Kunal for coming on the show to share your wisdom, expertise, and passion for public and private markets.
A word from AGM podcast sponsor, Ultimus Fund Solutions
This episode of Alt Goes Mainstream is brought to you by Ultimus Fund Solutions, a leading full-service fund administrator for asset managers in private and public markets. As private markets continue to move into the mainstream, the industry requires infrastructure solutions that help funds and investors keep pace. In an increasingly sophisticated financial marketplace, investment managers must navigate a growing array of challenges: elaborate fund structures, specialized strategies, evolving compliance requirements, a growing need for sophisticated reporting, and intensifying demands for transparency.
To assist with these challenging opportunities, more and more fund sponsors and asset managers are turning to Ultimus, a leading service provider that blends high tech and high touch in unique and customized fund administration and middle office solutions for a diverse and growing universe of over 450 clients and 1,800 funds, representing $500 billion assets under administration, all handled by a team of over 1,000 professionals. Ultimus offers a wide range of capabilities across registered funds, private funds and public plans, as well as outsourced middle office services. Delivering operational excellence, Ultimus helps firms manage the ever-changing regulatory environment while meeting the needs of their institutional and retail investors. Ultimus provides comprehensive operational support and fund governance services to help managers successfully launch retail alternative products.
Visit www.ultimusfundsolutions.com to learn more about Ultimus’ technology enhanced services and solutions or contact Ultimus Executive Vice President of Business Development Gary Harris on email at gharris@ultimusfundsolutions.com.
We thank Ultimus for their support of alts going mainstream.
Show Notes
00:00 Introduction to our Sponsor, Ultimus
01:18 Podcast Opening and Theme
01:55 Welcome to the Morningstar Investment Conference
02:29 Convergence of Public and Private Markets
03:12 Challenges in Transitioning to Private Markets
05:26 Morningstar's Evolution and Impact
06:59 Morningstar's Role in Reducing Costs
08:15 Evergreen Funds and Transparency
08:48 Complexities in Private Market Structures
09:36 Liquidity and Innovation in Private Markets
12:27 Investor Education and Common Language
14:34 Comparing Public and Private Market Investments
16:28 Standardized Documentation and Regulation
18:00 Educating Investors on Private Markets
18:52 Morningstar's Style Box for Private Markets
19:14 Data Availability and Analysis
20:24 Evaluating Different Investment Structures
21:09 Public-Private Partnerships and Transparency
21:38 Philosophical Questions on Private Markets
22:58 Behavioral Aspects of Illiquidity
24:00 Evergreen Funds as Buy and Hold Vehicles
24:15 Asset Allocation and Evergreen Structures
25:16 Investor Behavior and Market Volatility
25:25 Individual Investors vs. Advisors
26:32 Stability of Retail Assets
26:56 Retail Brokerage Apps and Crypto Trading
27:15 Impact of Social Media on Young Investors
27:29 Exposure to Private Markets
28:01 Market Drawdowns and Young Investors
28:27 Advisor-Led Models vs. Self-Directed Investing
28:57 Investor Behavior Across Different Age Groups
30:06 Morningstar's Role in Investor Validation
30:50 Morningstar's Independent Voice
32:01 Transparency in Private Markets
32:24 PitchBook and Data Transparency
33:02 Challenges in Private Market Data
33:26 Tipping Point in Transparency
34:54 Private Market Indices
35:37 Challenges in Benchmarking Private Markets
36:29 Lessons from Public Markets
37:12 Evolution of Private Markets
37:37 Future of Private Markets
38:41 Fee Structures in Private Markets
39:38 Operational Burden in Private Markets
40:50 Pre-Trade Market Structure
41:16 Access to Private Markets for All Investors
43:06 Returns and Diversification in Private Markets
44:51 Building Portfolios in a Lower Return Environment
47:15 Brand vs. Performance in Alternative Assets
49:18 Favorite Alternative Investments
Editing and post-production work for this episode was provided by The Podcast Consultant.
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