morningstar direct portfolio analysis for...

Morningstar Direct Portfolio Analysis for Advisors

© 2015 Morningstar, Inc. All rights reserved.

1

Portfolio Analysis is Morningstar Direct’s web-based solution for advisors to analyze performance and risk measures

for clients’ accounts. These accounts, which may contain a mix of managed investments with different styles, can be

evaluated in Portfolio Analysis to ensure a client’s goals and attitude to risk are met. This tool will provide you with the

data, charts, and reports to assist with the entire investment management process. Access Portfolio Analysis from

your Internet browser or Morningstar Direct.

For beginners, please refer to the Workflow Guide for New Users to learn how to access Portfolio Analysis.

Outline

Investment Policy Creation (Asset Allocation)

Integrate Custom Accounts (Portfolio Management)

Peer Group Returns-Based Analysis (Performance Reporting)

Dashboard for Holdings-Based Analysis

Contribution and Exposures by Manager

Create Branded Factsheets via Presentation Studio

Manager Research

Visit Portfolio Analysis in Morningstar Direct

Note: We will use the Multi-Manager Portfolio Data Set and Template for the examples below.

For more information on the first three topics (Asset Allocation, Portfolio Management, Performance Reporting),

please contact your Client Solutions Consultant.

“How can Morningstar Direct help with investment management and portfolio construction?”

https://direct.morningstar.com/PortfolioAnalysis



2

Investment Policy Creation (Asset Allocation)

1. Many advisors use the Asset Allocation tools in Direct to create investment policies for their clients. Once you have

defined your asset classifications and capital-market assumptions, the Asset Allocation tools will help you generate a

goal-oriented policy. This is accomplished using the efficient frontier, factor constraints, and performance testing.

Once the investment policy is determined, you can begin to build an optimized portfolio.

Integrate Custom Accounts (Portfolio Management)

1. If you have previously selected managers from an approved-list and determined the weights and/or market values,

you can manually enter the account into the Portfolio Management tool in Direct. Client accounts can also be imported

into Direct through the automated-import tool. To assist with client data integration, Morningstar has relationships

with many custodians and accounting platforms, including Advent, Albridge, Fidelity, Orion, Pershing, and Schwab.

Morningstar also has a partnership with ByAllAccounts to assist with client data integration.

Peer Group Returns-Based Analysis (Performance Reporting)

1. To begin analyzing your clients’ accounts, there are many tools in Morningstar Direct that are used in addition to

Portfolio Analysis. In the Performance Reporting tool, you can evaluate your clients’ accounts against benchmarks,

competitors’ portfolios, and peer groups using performance and risk measures. You can also use quantitative and

qualitative criteria to create custom grades for the accounts in the Scorecard tool. This is helpful if you’re responsible

for regular and ad-hoc evaluations of multiple accounts.



3

For more rigorous analysis, the Portfolio Analysis tool can help you predict the future success of your clients’ accounts

through holdings-based analysis.

Dashboard for Holdings-Based Analysis

1. Once your clients’ accounts are saved as an Investment List in Direct, add them to your Dashboard in Portfolio

Analysis.

2. For benchmark selection, this will be determined according to your Default Benchmark hierarchy in Global Settings

, but the benchmarks can be customized individually, or as a group. Click on the magnifying glass to choose a

specific market index or a custom blended benchmark.

3. Choose your Data Set. The default set of data columns on your Dashboard is intended to show quarterly

highlights for equity portfolios. Click on the Data Set icon, Open, and select Multi-Manager Portfolio Data Set. The

calculations that populate will show you the contributions and exposures for the entire account.

4. In your Global Settings , confirm that the Expand Composite Assets setting is not selected. This will prevent the

tool from drilling down to the securities level for your analysis. All calculations will be done at the managed investment

level (i.e., the first level of holdings in the account). (<- Uncheck)

Contribution and Exposures by Manager

1. From the Dashboard, click on the name of the account. In this example, we will examine an account that holds

mutual funds with a 60% equity, 40% bond policy. First, retrieve a new template, which is the group of tabs and

settings, by clicking on the Content Management icon in the footer. Next, select Morningstar Templates, and

then Multi-Manager Portfolio. This will automatically retrieve a template designed for analyzing clients’ accounts.

https://direct.morningstar.com/PortfolioAnalysis



4

Note that if you decide to select Expand Composite Assets, the calculations will drill through the manager level and

down to the equity level. This will aggregate the equity holdings for the entire account, which can give you insight into

a holistic view of the equity exposures. If this option is preferred, a Data Set and Template that are designed for equity

analysis should be selected.

The first tab will now show you the monthly Contribution calculations, both at the total account and group level.

Contribution, which calculates the weighted returns of the underlying managers, is a great way to understand the

contribution each manager makes to the account’s total performance.

2. Click on the Weights tab and analyze the exposures for the account. From left to right, the charts show Weights,

Returns, and Contributions in each column. The top row shows these calculation at the group level, which reflects the

Global Category assignments in this example. The bottom row reflects the best and worst managers.



5

3. Click on the Scatter Plot tab and choose from thousands of data points to analyze the underlying managers on

different metrics. By default, you see the 1-year total return (Y-axis) against the 1-year standard deviation (X-axis).

This risk-return analysis allows you to identify trends, and find outliers, among the managers.

“What is the outlier with high risk and a low return?” Find out by scrolling over the holding and clicking on the bubble.

4. Select the Holdings tab. This table has been a favorite of clients for years in Direct’s attribution tools. Click on

Weighting% in the header to sort the managers in descending order, then analyze the performance and risk statistics

for the holdings with the largest weights.



6

Create Branded Factsheets via Presentation Studio

1. Create a PDF report using a Factsheet template previously designed in Presentation Studio. If you have not visited

Presentation Studio in the past, select a Morningstar template.

2. To create a Factsheet, click on the Report button in the header. The Investment Detail Report, found under

Morningstar Templates, is frequently selected by advisors.

3. Once the template is selected, confirm the settings for your benchmarks, time period, and report name. Then click

on Run Report. You will be notified in the header once the PDF report completes.

4. You will also see a PDF icon next to this investment on your Dashboard. Return to your Dashboard by clicking on

in the footer. This icon allows quick access to this PDF report in the future.

Manager Research

After researching the account, you might want to learn more about a specific manager. In Portfolio Analysis, you have

quick access to Morningstar’s manager research.



7

1. In the header, click on the magnifying glass near the Portfolio dropdown to add a manager. After determining

the correct universe (e.g. Open End Funds, Separate Accounts), search for the manager that you want to learn about.

Note that if you already track a list of managers on an Investment List in Direct, you can retrieve that list immediately

in the Search box. Click on My Lists.

2. Once the manager is selected, select the Research tab to access Morningstar’s manager research, seen in the

Morningstar Global Fund Report. Morningstar’s analysts’ five-pillar research framework reinforces a consistent, long-

term investment process and provides the resources to justify a manager recommendation. Analysis for these pillars,

which include People, Process, Parent, Performance, and Price, are available for more than 4,000 funds.

Within this Research text component, you can also surface manager narratives, ETF research, and custom notes. Click

on the pencil-icon in the table’s header to change the content that’s important to you.

3. In addition to surfacing Morningstar’s research, Portfolio Analysis can be used to conduct your own manager

research. If you are interested, please reference the workflow guide for Manager Research.

This concludes the introduction to Portfolio Analysis for advisors. If you have any questions or concerns, please contact

your Client Solutions Consultant.

morningstar direct portfolio analysis for...

Documents