Morningstar's wealth and investment management arm is joining forces with Apollo, Franklin Templeton, and JPMorgan Asset Management to build a suite of public/private model portfolios for financial advisors, marking the latest move in a fast-accelerating competition to deliver private markets access at scale.
Under the partnership, Morningstar Wealth will deliver the new Morningstar Public/Private Select Series, which will integrate ETFs and interval funds – pooled vehicles that allow investors to redeem shares only during set windows – to make private market exposure workable within individual investor portfolios.
"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," Morningstar CEO Kunal Kapoor said in a statement.
Morningstar Wealth operates within Morningstar Investment Management, a registered investment adviser currently managing approximately $370 billion in AUM, according to the company.
The series will include six risk-based configurations, ranging from capital preservation to aggressive growth, with private credit and real estate allocations through interval funds. The private market exposures are expected to represent between approximately 12% and 20% of each model's total allocation, depending on the risk profile.
Unlike many public/private products built around a single firm's proprietary strategies, the Select Series draws on four partners – and on Morningstar's existing asset allocation and manager research infrastructure – to offer what the company describes as an independent, multi-manager approach.
The competition to deliver public-private portfolios at scale began as early as March last year, when BlackRock launched what it described as a first-of-its-kind public/private model portfolio. That vehicle, built through a UMA in partnership with iCapital and GeoWealth, and was seeded with its $1.1 billion Private Credit Fund and its $300 million Private Investments Fund. Private assets initially comprised roughly 15% of those models, with BlackRock saying it estimates the total market for managed model portfolios could double to $10 trillion over the next four years.
Goldman Sachs Asset Management followed suit that May with its own public-private model solution for registered investment advisors, also built through GeoWealth and supported by iCapital.
Fidelity Investments joined the field earlier this year, rolling out private market model portfolios alongside an alternatives education program for advisors. An advisor community survey conducted by Fidelity found that 46% of respondents were interested in model portfolios that blend traditional and alternative investments, according to a report on the launch.
Advisor interest in private markets has grown considerably. A January survey report by Hamilton Lane, conducted with Wakefield Research, found 86% of advisors and wealth professionals plan to increase client allocations to private market strategies this year.
Still, a December report from wealthtech provider Capital Preferences found that only 9% of advisory clients are currently invested in private markets, even though such exposures would be suitable for 82% of those clients' portfolios.
"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," said George Gatch, CEO of J.P. Morgan Asset Management.
Jenny Johnson, chief executive officer of Franklin Templeton – which recently launched an array of private markets model portfolios on the Corastone network – flagged the need to "focus on the long-term in a short-term world.
"We are living in an environment of persistent inflation and structural uncertainty," Johnson said. "We're excited to bring greater access to these types of solutions."
Jim Zelter, president of Apollo, underscored how model porfolios blending public and private markets "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,” Zeller said.
The Morningstar Public/Private Select Series – which will carry no overlay fee, according to the firm – is expected to be distributed to financial advisors through leading wealth and technology platforms, with full pricing, structure, and implementation details to be announced in the coming months.
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