Sean Allocca
5 min read
Morningstar’s CEO Kunal Kapoor has come a long way since he started at the company as a data analyst in 1997, when he compiled data on mutual funds — sometimes with the help of a fax machine.
Today, the Chicago-based firm has become one of the premier data providers on the planet and even offers indexed products, technology and robo-advice for retirement savers. “My job was basically entering data,” he said. “Believe it or not, at that time, it was like extracting gold.” The problem was a lack of transparency around mutual funds, where even compiling information from public documents, like yields and total net assets from fund companies, was a challenge. “Today, we sort of take it for granted, which is awesome.”
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Over the past eight years at the helm, Kapoor has helped the company expand its workforce to over 10,000 employees and boost its stock price more than threefold. Next up is tackling the private marketplace and creating a “common language” for advisors and investors to research both public and private investments using the same yardstick. “The private equity and private credit industry is not ready for that level of transparency, even as they have an interest in reaching investors” he said. “Ultimately, they are going to come around to the view that they have to make it simpler.”
Kapoor chatted with Advisor Upside during Morningstar’s Investment Conference held annually in Chicago.
What’s your take on the massive public-private market convergence?
The public markets will remain the mainstay for most investors. [Private markets] have to adopt a framework that’ll allow for easier transactions and for lower costs. Do I think what exists today for advisors is best in class? No. Do I think that because advisors are starting to get more heavily involved in the space, it’s going to lead to better products, and lower-cost products, and more transparency? Yes.
It’s a journey, as with all things. What shouldn’t be lost is that there’s a really important reason why it’s happening: The number of companies that are private has increased. The amount of debt being issued in private markets — outside of the money center banks — is increasing, and so as an investor, you have some clear ability to think about that in terms of how you’re building exposure to your portfolio.
The truth is more Americans than ever work for companies that are backed by PE. And so, they’re partly more familiar, and want to invest in these companies, because they’re part of that ecosystem. It used to be that not everybody would get equity and get to participate in its success, but that model has been changing.
