Morningstar Runs the Numbers

Inspired by Harper's Index (with a tip of the hat to FiveThirtyEight's Significant Digits blog), Morningstar Runs the Numbers uses a numbers-based approach to highlight recent Morningstar research, along with some outside news stories.

10 Head of global manager research Jeff Ptak pointed out that actively managed funds accounted for about 63% of U.S. open-end and exchange-traded-fund assets on May 31, 2017, but only three years prior, it was around 72%. If the industry fails to adapt in necessary ways, Ptak believes passive funds could capture another 10 percentage points of fund market share in the next decade or so.

"Passive funds, including strategic-beta ETFs, recently held around $6.2 trillion of $16.5 trillion in U.S. fund assets. Given a semiconservative 4% annual organic growth rate on the U.S. fund industry for the next decade, that would vault passive assets to around $11 trillion by 2027. Depending on assumptions for sources of future growth (market appreciation or flows), that would imply at least $1 trillion in outflows from active."

3 International-stock funds have had a good run in 2017, but this brief period of outperformance is unlikely to mean that most investors are suddenly overexposed to non-U.S. equities. Investors do need realistic expectations, but it might actually make sense to consider adding to foreign positions. In this video, Morningstar analysts discuss three highly rated international-equity funds.

2025 In its June 14 policy statement, the Fed released details about its balance sheet normalization program. The central bank in July released additional details about that program, including its expectations for the size of the balance sheet by 2025 under various scenarios. (The Fed's balance sheet currently comprises $4.5 trillion worth of Treasuries and other assets.)

14 The Morningstar US Dividend Growth Index focuses on companies with a history of dividend growth and the ability to sustain it. To find 14 high-quality companies with sustainable and growing yields, we screened the index looking for companies with wide economic moats, which means we think they have advantages that will allow them to fend off competitors and remain profitable for at least 20 years. We also insisted the stocks carry fair value uncertainty ratings of medium or low, ensuring that we zeroed in on companies whose fair value estimates our analysts were most confident in.

0.79

"The company reported solid headline figures, with sales of $744 million and earnings per share of $1.09 meeting management's guidance and consensus estimates. We believe the sell-off was in response to MSC's weak gross margin performance and guidance. However, we think the market's reaction was overblown. We are maintaining our $91 fair value estimate, which puts MSC in 4-star territory."

5 Morningstar's manager research group has been adding many funds to coverage in recent months. Director of manager research Russ Kinnel brings readers up to speed on five of the better ones in this article.

37 Tennis all-star Venus Williams is on the verge of what could be her most meaningful victory yet at her 20th Wimbledon, The New York Times reported. At 37, not only is she at an age where many of her peers have "moved on to coaching," the Times points out, but many people have been skeptical of her odds of winning.

" 'If Venus wins it, I think this one might mean more to her than any other one just because of everybody writing her off, no one thinking she could ever continue to play the level that she wanted to play,' her coach, David Witt, said."

3 The pace of change in our world has been breathtaking in recent years, with technological innovation allowing us to carry powerful computers in our pockets and drive more fuel-efficient electric hybrid cars. And the ground has been shifting beneath investors' feet, too, says director of personal finance Christine Benz. In this article, she discusses three notable developments and their implications for investors.

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