Four tips for Boutique Firms Working with Morningstar

by Melissa Murphy

Morningstar is a leading provider of independent mutual fund, ETF and investment research. Many small fund firms struggle with how to effectively work with this organization.
Morningstar is important because if its influence on retail investors and advisors. However, some organizations feel they’re not responsive, provide imbalanced negative analysis and miscategorize their funds.

It’s important to note the most asset flows are directed to funds with four or five star ratings or newer funds without star ratings. That means the best opportunity for marketing is at launch or if a fund has four five stars. See the bottom of page five of the section titled “Fund Flows – Monthly Market Summary - US ETFs” for details: http://corporate.morningstar.com/us/documents/FundFlows/FundFlowsNov2009.pdf

The following is an overview of four essential steps to take to build a relationship with Morningstar.

1) An important first step is to review Morningstar.com and familiarize yourself with the data the site offers about your fund and funds in general, as well as the star rating methodology. Click here for an overview of the star rating methodology:
http://quicktake.morningstar.com/FundNet/PrintReport.aspx?Country=USA&Symbol=BJGQX

2) Establish a relationship with a Morningstar analyst or the head of mutual fund coverage.
Reach out to the most relevant analyst to introduce yourself, your funds and your investment process.

3) Visit Morningstar headquarters in Chicago. Nothing beats building rapport and establishing a relationship more than an in-person visit. Morningstar analysts are more willing than you might think to work with you, hear your story and evaluate your fund for analyst coverage.

Per Morningstar, analyst coverage is based on six factors: performance, size of the fund, fund’s expense ratio, user requests, quality of management and whether the fund is interesting enough to cover. One useful way to spur user requests is to harness influence from social media campaigns or outreach by fund companies asking for requests.

4) Take note of the newer offerings: video interviews with fund managers and submission of shareholder letters/commentaries/white papers. Morningstar offers portfolio manager video interviews, and select videos are posted to the homepage of Morningstar.com. Video interviews are available to fund managers visiting Chicago – even if they’re not scheduled for a meeting with an analyst. The interviews are associated with the fund’s ticker so if a user searches for a fund and pulls up the relevant page, the video will be posted there.

Morningstar Perspectives is a service where fund firms can submit shareholder letters, market/economic commentary and investment white papers. Morningstar’s editorial team will review all submitted content and decide what to feature on the site, across numerous areas including the Morningstar.com homepage, the fund/stock/ETF main pages, the new personal finance section, and more. Liana Madura is responsible for setting up contributor accounts for each fund firm, and can also provide a sample article to review before anything goes live on the site. Here’s a link to the main page for Morningstar Perspectives: http://news.morningstar.com/articlenet/article.aspx?id=269611&pgid=fundarticle

Overall, videos and Perspectives are excellent exposure for small funds and a real opportunity for a manager to bring his/her strategy to life.