Morningstar’s portfolios will be constructed with ETFs and interval funds to make private markets usable in individual investor portfolios
Global financial services firm Morningstar has announced the tie-up between its Morningstar Wealth division and Apollo, Franklin Templeton, and JP Morgan Asset Management, with the goal of launching a suite of public/private model portfolios that will give financial advisors a single, research-driven way to access private markets.
“Morningstar’s Public/Private Select Series will bring together Morningstar Wealth’s asset allocation, manager research, and due diligence rigor; public market strategies from Franklin Templeton and JP Morgan Asset Management; and private market strategies from Apollo and Franklin Templeton, spanning private credit and real estate,” the company stated.
“Unlike many public/private offerings built around a single firm’s strategies, Morningstar Wealth draws on its experience in asset allocation, investment selection, and portfolio construction, with a research-led focus on investor outcomes. Morningstar Wealth is a group within Morningstar Investment Management LLC, a registered investment adviser, which works with advisors to provide investment strategies such as model portfolios and separately managed accounts (SMAs) with USD 370 billion in assets under management,” it added further.
“Morningstar is bringing independent research, disciplined asset allocation, and transparent pricing together in a single framework, so advisors can help navigate complex private markets and democratize access to them for even more investors,” said Kunal Kapoor, Morningstar’s CEO.
The portfolios will be constructed with ETFs (Exchange-Traded Funds) and interval funds to make private markets usable in individual investor portfolios. The suite will offer six risk-based portfolios, ranging from capital preservation to aggressive growth. Public and private exposures, on the other hand, will be integrated into a single asset allocation. The whole process will be transparent, as the pricing will be competitive and will exclude overlay fees.
“By packaging private market exposure within a diversified model, Morningstar Wealth aims to remove the burden of sourcing, sizing, and managing liquidity, allowing advisors to focus on client needs rather than portfolio construction. The initial models will include exposure to private credit and real estate through interval funds ranging approximately between 12 and 20% of the models’ allocation, depending on risk profile and current market opportunity,” the venture stated further.
Private markets have historically been limited to institutional investors and ultra-high-net-worth individuals. At the same time, industry demand continues to grow, with advisors increasingly seeking to incorporate private markets into mainstream portfolios.
Jenny Johnson, chief executive officer of Franklin Templeton: “When I think about why private markets matter now more than ever, it’s not just access but also a focus on the long term in a short-term world. We are living in an environment of persistent inflation and structural uncertainty. We’re excited to bring greater access to these types of solutions.”
George Gatch, CEO of J.P. Morgan Asset Management, said, “As markets continue to test traditional investment approaches and the 60/40 portfolio evolves, advisors need access to a much broader set of investment opportunities and strong oversight. Together this group can help deliver diversified portfolios that lean on the expertise of skilled active managers to integrate public and private markets prudently.”
Jim Zelter, president of Apollo, remarked, “The next generation of model portfolios will blend public and private markets and offer investors greater diversification, more yield, and better reflect the full breadth of the economy. These models reflect what clients are seeking, private markets as a core portfolio building block, rather than an allocation to the side.”
With the vision of making the portfolios sensitive towards investor concerns like liquidity constraints, valuation timing, and complexity, Morningstar’s approach emphasizes research-driven allocations between liquid and illiquid assets, rigorous due diligence, ongoing oversight, and clear disclosure of liquidity and portfolio characteristics.
“Morningstar Public/Private Select Series is expected to be made available to financial advisors through leading wealth and technology platforms. All four organizations are fully committed to working as one to support shared clients, platforms, and advisors, ensuring comprehensive pre- and post-purchase support, reporting, and education,” the financial services firm concluded.
