Firm Information
Morningstar Investment Management LLC is a Delaware limited liability
company that was incorporated in 1999. Morningstar Investment
Management is a wholly owned subsidiary of Morningstar, Inc.
(“Morningstar”). Morningstar is a publicly traded company (Nasdaq Ticker:
MORN) with Mr. Joseph Mansueto, Executive Chairman of Morningstar,
holding more than 35% of Morningstar’s outstanding shares. Because of that
ownership, Mr. Mansueto is an indirect owner of Morningstar Investment
Management.
Morningstar Investment Management is registered with the SEC under
Section 203(c) of the Investment Advisers Act of 1940, as amended
(“Advisers Act”). Morningstar Investment Management has filed the
appropriate notices to conduct business in all 50 states, the District of
Columbia, Guam, and the Commonwealth of Puerto Rico. Morningstar
Investment Management is registered with the U.S. Commodity Futures
Trading Commission as a Commodity Pool Operator (“CPO”) and is a member
of the U.S. National Futures Association.
Morningstar Investment Management, along with other Morningstar
subsidiaries authorized in appropriate jurisdictions to provide investment
management and advisory services, is part of a global investment team
composed of investment analysts, portfolio managers, and other investment
professionals. These investment and operations teams span the globe, with
primary offices in Chicago, London, and Sydney.
This brochure focuses on the products and services we provide to institutional
clients. You can obtain a copy of our brochure describing our products and
services for individuals (managed account, advice, and personal target-date
fund services for retirement investors) by following the instructions above.
Advisory Services We Offer – Overview
Morningstar Investment Management offers various investment advisory
services that focus on our core capabilities in asset allocation, investment
selection, and portfolio construction to financial or other institutions including,
but not limited to, asset management firms, banks, broker/dealers,
consultants, endowments, foundations, insurance companies, investment
advisers, investment fiduciaries, plan sponsors of retirement plans, providers
of retirement plan services, trusts, and other business entities (collectively
“Institutional Clients” or individually, an “Institutional Client”.)
Morningstar Wealth and Morningstar Retirement each offer certain advisory
services provided by Morningstar Investment Management.
The advisory service below is offered through both Morningstar Wealth and
Morningstar Retirement:
Institutional Asset Management
For Institutional Clients who sponsor registered or pooled investment
products, we serve as a portfolio manager, portfolio construction adviser, or
sub-adviser. We provide recommendations for asset class allocation targets
and/or selection of underlying holdings to fulfill each asset class allocation
target. Underlying holdings may include, but are not limited to, open-end
mutual funds, exchange-traded funds (“ETFs”), and collective investment
trusts. The universe of underlying holdings is generally defined by the
Institutional Client and can include investment products that are affiliated with
that Institutional Client. This service typically includes ongoing responsibilities
such as monitoring the underlying holdings and reviewing and updating asset
allocation percentages and/or underlying holdings as necessary.
We are an investment adviser to Morningstar Funds Trust, registered with
the SEC as an open-end management investment company under the
Investment Company Act of 1940, as amended. We have overall supervisory
responsibility for the general management and investment of the fund
portfolios within the Morningstar Funds Trust (“Morningstar Funds”), which
are managed in a multimanager structure. Subject to the review and approval
by the Morningstar Funds Trust’s board, we set each Morningstar Fund’s
overall investment strategy. We are also responsible for the oversight and
evaluation of each Morningstar Fund’s sub-advisers. The Morningstar Funds
will be used as the underlying holdings for certain model portfolios, most
notably mutual fund model portfolios, offered by Morningstar Investment
Management and our subsidiary, Morningstar Investment Services LLC The
Morningstar Funds include the Morningstar Alternatives Fund, Morningstar
Defensive Bond Fund, Morningstar Global Income Fund, Morningstar
International Equity Fund, Morningstar Multisector Bond Fund, Morningstar
Municipal Bond Fund, Morningstar Total Return Bond Fund, Morningstar U.S.
Equity Fund, and the Morningstar Global Opportunistic Equity Fund. More
information about the Morningstar Funds is at
http://connect.rightprospectus.com/Morningstar.
Wealth
The advisory services below are offered through Morningstar Wealth:
Model Portfolios and Separately Managed Accounts
For Institutional Clients who offer a proprietary advisory program, or a platform
that makes investment strategies available for use by other financial
institutions, we create model portfolios and separately managed accounts
(collectively, “Portfolios”) for use through such programs or platforms. The
Portfolios are typically designed for use by a financial professional with their
retail investor clients, and can include risk- or target date-based asset
allocation portfolios, portfolios designed to address a certain financial
planning need or goal, or relatively focused stock or bond portfolios. We
generally provide sales support on behalf of the Institutional Client by
educating financial professionals who use the program or platform about the
strategies we provide. In providing this service, we act as either a
discretionary investment manager or a non-discretionary model manager. We
select and monitor the asset allocation and underlying holdings of each
Portfolio based on a universe of investments typically defined by the
Institutional Client. In general, we provide ongoing monitoring of the
Portfolios, along with rebalancing and reallocating recommendations. As an
investment manager, we invest each investor’s account in their chosen
Portfolio(s), taking into consideration any requested reasonable restrictions,
and submit trade instructions to the investor’s custodian. The investor’s
financial professional or the investor is responsible for suitability, choice of
custodian, and other services as detailed in the agreement between the
Institutional Client and us. As a model manager, the Institutional Client or the
financial professional using the advisory program or platform has discretion
over the accounts invested in each Portfolio and has the ability to deviate from
our recommendations.
In addition, our subsidiary, Morningstar Investment Services LLC, offers
Portfolios on a discretionary and non-discretionary basis. Morningstar
Investment Management’s investment professionals provide portfolio
construction and ongoing monitoring of those Portfolios on behalf of
Morningstar Investment Services.
The Portfolios, most notably those utilizing mutual funds, may have underlying
holdings that include one or more of the Morningstar Funds. The Morningstar
Funds became accessible through certain Portfolios in November 2018. Each
Morningstar Funds’ summary prospectus, prospectus, statement of
additional information (‘SAI”), and other regulatory filings are available at
http://connect.rightprospectus.com/Morningstar.
Asset Allocation Services
We provide Institutional Clients and their financial representatives tools for
identifying their clients’ investment goals and risk tolerance (such as risk
tolerance questionnaires), and a mechanism to match those goals and risks
with an appropriate asset allocation strategy. Asset allocation services are
typically used by our Institutional Clients in their investment products, wrap
programs, variable annuity asset allocation programs, or similar programs. If
included in an agreement with an Institutional Client, asset allocation models
are periodically reviewed and adjusted as needed. We may provide
Institutional Clients with rebalancing triggers and recommendations on when
the allocations for asset classes should be revisited or adjusted.
Investment Analytics, Monitoring, and Comparative Analysis Reports
We offer Institutional Clients investment performance and style monitoring
reports. These reports range from a one-page snapshot view of multiple
investments, such as those investments in a defined contribution plan lineup
to multi-page, in-depth reports on a single investment that provides
information on various aspects of the investment such as profile, style and
sector analysis, total return/risk summary, performance, expense, portfolio
metrics, top holdings, and an optional written analysis of the investment. To
fulfill any monitoring responsibilities, we follow the same comprehensive due
diligence process that we use to facilitate our investment selection research
in these reports.
Morningstar Retirement
Morningstar Retirement is committed to helping people improve their
financial health and prepare for retirement by offering investment advice and
managed accounts, custom model portfolios, and fiduciary services to plan
providers, employers, and retirement investors. The advisory services below
are offered through Morningstar Retirement:
Custom Model Portfolios
We construct custom asset allocation model portfolios for use with employer-
sponsored retirement plan accounts using the investment options available in
a plan’s lineup. Model portfolios can be time-based, risk-based, or a
combination of time- and risk-based. Model portfolios, including target-date
glide paths where relevant, are customized to the specific plan, and can take
into account a wide range of factors including the presence of defined benefit
assets, company stock holdings, savings rates, and account balances. We
provide monitoring of the model portfolios (and glide paths), making
recommendations to change investment allocations, and/or to add, remove,
or modify the model portfolios’ underlying investment options when
necessary. Our recommendations and investment decisions are limited to
those investment options available under the client’s retirement plan lineup.
Fiduciary Services
We provide Institutional Clients with retirement plan services that include the
construction, monitoring, and/or management of plan lineups. These services
typically include automated reporting capabilities, marketing and sales
support, and an online reporting delivery mechanism. We provide
documentation of the process used to select, review, monitor, and update
the funds chosen. We offer a workforce profile questionnaire designed to help
a plan sponsor identify the investment sophistication, funding status,
investment goals, and/or risk tolerance of the retirement plan or its
participants. We also typically provide methodology documents, an
investment policy statement, quarterly fund and plan performance reports,
annual summary reports, and a quarterly market summary.
In providing these services, we serve as a fiduciary, as defined in section
3(21)(A) ERISA, as amended, and may additionally serve as an investment
manager, as defined in section 3(38) of ERISA.
We construct a list of lineup options (including, but not limited to, collective
investment trusts and/or mutual, money market, and/or stable value funds)
from the universe of investment options defined by the Institutional Client.
We provide asset-class requirements for the lineup, with specific investment
options identified for each asset class, for use in developing a lineup for a
defined contribution or defined benefit retirement plan. This process is
designed to provide the Institutional Client with investment choices that will
result in a lineup that is appropriately diversified with a sufficient broad range
of risk/return characteristics.
Under our standard 3(21) service, we serve as a fiduciary with respect to the
investment selection and monitoring we provide, but the Institutional Client
retains responsibility for investing plan assets in accordance with our
recommendations. We provide ongoing monitoring of the specific
investments in the approved investment list and monitor individual plans to
ensure they are meeting our asset-class requirements and investing in
approved funds. Typically, if we recommend modifications to a lineup, we
provide notice to the Institutional Client who has discretion to implement our
recommended changes.
For our “flexible” 3(21) service, we offer the services outlined under our
standard 3(21) service but allow the Institutional Client the flexibility to
choose investments from our approved investment list along with non-
approved investment options for their lineup. Our fiduciary support covers the
use of investment options from our approved list only. Under this service, we
do not provide any fiduciary coverage on the end lineup.
In some cases, Institutional Clients delegate discretionary management
responsibilities to us. For our standard 3(38) service, we serve as a fiduciary
with respect to the investment selection and monitoring we provide and we
act as an investment manager for the plan, with full authority to select,
remove and replace investment options from the plan lineup. We provide
periodic monitoring of the specific investments in the approved investment
list and monitor individual plans to ensure they are meeting our asset-class
requirements and investing in approved funds.
For our “flexible” 3(38) service, we offer the services outlined in our standard
3(38) service but allow the Institutional Client the flexibility to request some
variability in our standard process, such as the ability to include more
approved investment options in asset classes than we allow under our
standard service. This service is designed to help avoid too much disruption
as Institutional Clients convert their plans to our service.
We offer Morningstar® Plan AdvantageSM, an online platform designed to help
retirement plan sponsors served by financial professionals of Institutional
Clients (1) identify a category-level plan lineup, (2) choose a plan provider
from those available through Morningstar Plan Advantage (choice of plan
provider can be further limited by the Institutional Client), and (3) access 3(21)
or 3(38) fiduciary services as part of a bundled offering. Once enrolled, plan
sponsors and their designated plan advisor can review their lineup and access
reports, view notifications, and learn more about plan lineup changes.
Managed Accounts, Advice, and Guidance
We offer services to Institutional Clients for use with individual retirement
investors in their employer-sponsored retirement plans or other retirement
products, like individual retirement accounts or health savings accounts
earmarked for retirement (each a “retirement account”). These services are
intended for citizens or legal residents of the United States or its territories
and are offered through retirement plan sponsors and/or plan providers, plan
administrators, retirement product providers, and/or other investment
advisers (each a “service provider.”) These services typically include
guidance, advice and/or managed account options, along with an online
platform to access those services. Guidance includes general and educational
information and tools to help retirement investors manage their retirement
account. Under Guidance, the retirement investor is responsible for
determining the suitability of investments, implementing changes to their
retirement account, and monitoring their account on an ongoing basis. Advice
offers each retirement investor a target retirement income goal, projected
retirement income amount, recommendations on savings rate and retirement
age, personalized asset allocation strategy, and professional investment
selection. Under Advice, the retirement investor is responsible for the
implementation of any changes to and the monitoring of their retirement
account. Under Managed Accounts, we will manage the retirement investor’s
account on an ongoing basis, in addition to the items provided under Advice.
Our account management includes ongoing monitoring, automatic account
rebalancing and implementation of changes, quarterly progress reports, and
an annual progress report. We use the investment options available in the
retirement plan or product to construct a portfolio and, when applicable,
monitor model portfolios designed for retirement investors across a broad
range of risk exposure levels.
Advisor Managed Accounts is a product name for Managed Accounts or
Advice that allows investment advisers, consultants, or asset managers to
incorporate their own asset allocation and fund selection capabilities into our
offering. Under this service, the investment adviser, consultant, or asset
manager is responsible for building plan-level portfolios from each plan or
product’s investment options or non-core investment options, if available
through the service provider. The plan-level portfolios are used in our portfolio
assignment methodology to create hundreds of retirement investor-level
portfolios that span the equity spectrum. If we engage an asset manager as
a sub-adviser (“Sub-Adviser”) to provide portfolio construction services for
Advisor Managed Accounts, we are responsible for the investment-level
portfolios created for users of our services and there is no advisory
relationship between you, your retirement investors or product users, and the
Sub-Adviser. Each retirement investor is then assigned to a portfolio
appropriate for their retirement goals. As part of Managed Accounts, each
retirement investor receives a target retirement income goal, projected
retirement income amount, and recommendations on savings rate and
retirement age. We manage the retirement investor’s account on an ongoing
basis, which includes ongoing monitoring, automatic account rebalancing and
implementation of changes, quarterly progress reports, and an annual
progress report.
If made available by the plan sponsor or service provider, retirement investors
have the option to complete an annuity questionnaire. Through this
questionnaire they can indicate whether they would like to receive a
recommendation for how much of their retirement account could be invested
in an annuity while still aligning with our investment strategy. We do not
recommend, endorse, or sell any specific annuity products as part of this
allocation recommendation and do not provide advisory or discretionary
investment management services to assets invested in an annuity. If
requested by the plan sponsor or service provider, we will integrate access
to an annuity marketplace or provider into our platform to help facilitate the
retirement investor’s purchase of an annuity, if they decide to do so. In such
instances, the annuity or annuities available are chosen by the plan sponsor
or service provider and we have no role in selecting those annuities. An
annuity allocation recommendation is only available through the Managed
Accounts service.
We offer advisory services to Institutional Clients who offer their own
investment advice or managed account programs to their clients. In most
cases, we serve as the independent “Financial Expert” as defined within the
Department of Labor’s Advisory Opinion 2001-09A dated December 14, 2001
(commonly referred to as the “SunAmerica Opinion.”) We use the investment
options available in a retirement investor’s lineup or product to construct and,
when applicable, monitor model portfolios designed for retirement investors
across a broad range of risk exposure levels. We may also use information
provided by independent third parties such as mutual fund data or index
providers in the construction of advice for the program.
Personal Target Date Fund Service
We offer a personalized target date fund service to Institutional Clients for
use with retirement investors. This service includes a personalized asset
allocation strategy and professional investment selection for individual
retirement investors invested in employer-sponsored retirement plans or
other retirement products, like individual retirement accounts (“IRAs”) or
health savings accounts (“HSAs”) earmarked for retirement through an online
platform. The asset allocation strategy utilizes one or more target date fund
vintages, is based on the retirement investor’s financial situation and
retirement goals using the information the retirement investor, plan sponsor,
service provider(s) and/or an account aggregator provides, and includes
ongoing monitoring and automatic account rebalancing and implementation
of allocation changes. After determining the retirement investor’s asset
allocation target, the target-date funds available in the retirement investor’s
plan or product are used to create an investment-specific portfolio. We
manage the retirement investor’s account on an ongoing basis and
communicate our investment decisions to the plan or product’s service
provider.
The target date fund series available in the retirement plan or product could
be associated with an Institutional Client or plan or product’s service provider.
In such instances, the service provider, or their affiliate, may receive
compensation based on the assets in those investments which gives the
service provider an incentive to make those investments available.
Retirement investors will periodically receive progress reports reflecting
progress towards their retirement goals and other information in regard to
their investments. Typically, these reports are available electronically through
our website on a quarterly basis. On an annual basis, those eligible for, but
not currently enrolled in the Personal Target-Date Fund Service may receive a
Personalized Strategy Report. Using data provided by the plan sponsor or
service provider, we outline a retirement strategy that we feel is appropriate
for the retirement investor based on the information available to us.
Customized Services
At an Institutional Client’s request, we will take under consideration a request
to provide them with a customized version of the above services or a different
type of advisory services that would utilize our core capabilities in asset
allocation, investment selection, or portfolio construction. Given the
customized nature, the Institutional Client can impose constraints/restrictions
on such things as security types, asset classes, or proprietary security
requirements and/or wish to collaborate with us on such things as investment
methodology and screening criteria.
Wrap Fee Programs
We do not sponsor a wrap fee program, but we do provide portfolio
management services to a wrap fee program offered by our subsidiary,
Morningstar Investment Services LLC, through the Morningstar Wealth
program.
Assets Under Management
As of December 31, 2023, the discretionary regulatory assets under
management for Morningstar Investment Management (rounded to the
nearest $100,000) were:
Retirement Services to Individuals: $19,580,600,000
Investment Management Services to Institutional Clients:
$35,112,600,000
Total Regulatory Asset Under Management: $54,693,200,000
The non-discretionary assets under advisement for Morningstar Investment
Management (rounded to the nearest $100,000) were $190,639,500,000.