Empowering investors and demystifying investment portfolios are top of mind for Morningstar CEO Kunal Kapoor.
Mr. Kapoor addressed the polarization of ESG views in the U.S., the role of artificial intelligence and the importance of long-term investing in an interview at the annual Morningstar Investment Conference, held in London on Tuesday.
On ESG, Morningstar's data and research, including that of its Morningstar Sustainalytics unit, is in demand by investors — and is a tool for clients to use in the ongoing debate over taking environmental, social and governance considerations into investment decisions.
"It helps them personalize how they want to build a portfolio. Many of the political arguments … don't talk about whether the data is useful or not. (An investor) can fall on either side of the aisle and the data is useful to make decisions," he said, adding that finance is at its best when it is democratized and investors can make use of the information and data.
Demystifying portfolios is a focus for Mr. Kapoor and his team. Morningstar has "invested very heavily in ESG (-related data) because we think it does empower investors, allow them to make choices." The firm has also invested in private equity and private debt information — "we see a lot of growth in private debt coming in the next few years," with non-bank financial institutions stepping into the fray to provide finance to companies, for example.
"If it goes in a portfolio, we want to be able to … demystify it," Mr. Kapoor said. The firm has 750,000 investment vehicles in its managed funds database alone, for example.
Regarding today's investment environment, Mr. Kapoor said while the "headlines are not pleasant," ranging from the topic of ESG polarization, to high inflation and rising interest rates, "you don't make your money by focusing on three, six, nine, 12 months. Our message is the world goes up and down, and as investors you have to put yourself in a position where you have a plan and you want to stick to the plan, regardless of what the world around you may or may not be doing."
While it may be difficult, investors "have to control (their) very worst behavioral instincts" in the current environment. But the reality is "it is a much better time to be entering markets … than two years ago," with fixed income in a "better spot, stocks are cheaper (and one) could argue that the froth is starting to be shaken out" of private markets, he said.
Mr. Kapoor also addressed AI, which is used internally to collect data and to automate standardized processes, for example. Morningstar also presented its generative AI chatbot, Mo, at the conference. The chatbot is designed to summarize the firm's independent insights in a conversational format, according to a news release.
Finally, Mr. Kapoor is "glad we are talking about crypto less — I think people don't understand it," and investors can't invest in something they don't understand.
