Sign up today and take advantage of member-only content — the kind of timely, cutting edge industry insight that only Money Management Executive can deliver.
  • Exclusive Online Only Content
  • Free Daily Email News Alerts
  • Asset Management Blogs

Lipper, S&P Join Morningstar in Shooting for the Stars

The information may be the same, but all things are not equal when it comes to providing investors with fund data.

Morningstar of Chicago, and Lipper and Standard & Poor's, both of New York, all have their eye on the same piece of the pie, and all three claim to be leaders in one way or another when providing data to investors.

Mutual Fund Market News asked the trio to detail their core mutual fund products and services. From there, we conducted interviews with representatives from each company, posed a series of questions asking each to critique their own strengths and weaknesses, as well as those of the competition, and went one step further to speak to consultants.

You've Seen One Number. . .

Geoffrey Bobroff, president of Bobroff Consulting in East Greenwich, R.I., said that none of the companies has made itself the clear leader in the space. "Their data is probably pretty comparable," he said, noting that deciding which one to use basically comes down to personal preference.

"The problem is the marketplace is large enough that all four can survive and survive nicely," he said, including Weisenberger/Thomson in the mix as well. Weisenberger, a Rockville, Md., division of Thomson, publisher of this newsletter, failed to provide the requested information by press time.

"I don't think any one is perfect," Bobroff said. "Lipper is used more institutionally, both by institutions and fund groups," he said, adding that Lipper data is also used more in the brokerage community. Morningstar is more widely used by individual investors, financial advisers and also some brokerage firms, he said.

"S&P is more of a latecomer to the party," Bobroff said.

Predicting the Future?

But, some differences exist in the ratings systems, said Bobroff, noting that Morningstar's process is based on past performance and risk, while both Lipper and S&P fancy themselves as being more "predictive."

However, Chip Roame, managing principal of Tiburon Strategic Advisors in Tiburon, Calif., said he sees Morningstar as the leader. "Morningstar seems [to be] the leader in packaging that data and making things user friendly," he said, acknowledging that all these companies "fundamentally have the ability to produce the same products."

Roame ranked S&P second and Lipper third of the three. "Lipper owned this business 10 to 12 years ago, but Lipper faded and didn't stay on the cutting edge of consumerism. They didn't package what they did in user-friendly formats," he said.

However, it isn't all bad news for Lipper in Roame's eyes. Lipper has recently done an about-face and is "doing a lot of good things" and offering a lot of new products, he said. "When the market picks back up, they may do exceptionally well. It seems like they have a good strategy in a bad market. They need to wait it out."

While Roame may have provided a ray of hope for Lipper's future, the present isn't looking so bright, according to a recent survey his company conducted. Tiburon's "Best Practice Survey" of 3,000 advisers doesn't even show Lipper on the radar screen of those surveyed.

Of those polled in the fee-only channel, 67% said they use Morningstar products, while 18% use S&P. Another 10% said they use Weisenberger and 22% Value Line of New York. Lipper didn't register in the top 10 on the list. Those surveyed rated their satisfaction with Morningstar, on average, an 8.1 out of 10. Value Line came in second with a 7.6, followed by S&P at 7.4 and Weisenberger at 7.1.

Of data research services, 74% said they use Morningstar, with 20% using S&P. Twenty-nine percent of independent data researchers said they use Weisenberger information and 18% Value Line. Again, Lipper didn't make the top 10 on this portion of the survey, either.

Voters were allowed to vote for more than one company, checking off all the companies they rely on for data. This group rated their satisfaction of Morningstar an 8.2, with Value Line a 7.7 and S&P a 7.5.

Bobroff said that Lipper's move into the intermediary market, with its product launches and its Lipper Leaders, has not really done much for the company - yet. "I have not sensed that they've gotten any traction," Bobroff said. However, he did say that people are not looking for new products of this sort in a bear market, and that when the bulls return, sentiment towards Lipper may change.

"The marketplace isn't ready to accept something new. No one is looking to expand," Bobroff said.

Four-Star Rating

While all three are quick to claim leadership roles in the industry, it is Morningstar that is often viewed as the frontrunner in the mutual fund data wars in the United States, especially in the intermediary market.