1. You are Morningstar CEO and need to decide how to generate future revenue and cut future cost in the context of the Morningstar article. Use the principle you learned about Buy vs. Make decisions in this course, ask your CFO three key questions related to accounting concepts to help you make the decision. Please use the following article listed below in your analysis.
2. Robots are being let loose to write investment reports for Morningstar, the research house that helps investors choose among thousands of mutual and exchange traded funds for saving and retirement. At a time when the finance industry is debating the workloads of its staff during a boom in activity and a disruptive pandemic, Morningstar has found a way to increase its written research without further taxing its army of human analysts. The machine-generated reports that began rolling out this week set out the rationale behind Morningstars socalled analyst rating on a fund, which run through gold, silver and bronze to neutral or negative. The ratings, similar to Wall Street buy or sell recommendations, are separate from Morningstars more famous star ratings system, which just measures funds past performance. Robots were already being used to generate the analyst rating itself on thousands of smaller funds. Morningstar said this week that the robot ratings have performed as well as the recommendations generated by human analysts, based on three years of data. The companys 130 global analysts will stay focused on the most popular funds, said Lee Davidson, head of manager research and quantitative research at Morningstar. They currently provide written reports on 4,284 funds globally, representing $20.5tn of assets under management. You need boots on the ground to interview a fund manager and talk to the team about their investment process, said Davidson. That kind of colour is not captured by the quantitative process. Computer-generated ratings apply to a further 37,962 funds that account for $14tn of assets under management, and it is these funds that will now start to get written reports penned by robots. Providing a written report helps explain the justification for a funds rating, its risks and rewards in the future, Davidson said. Morningstar has spent the past 18 months working on the machine writing process and Davidson said we will need to keep improving them, incorporating suggestions from asset managers and investors. The machinewritten analysis will automatically update each month. Both the human analyst and machine-derived ratings are meant to tell investors whether a fund is likely to outperform or lag an index or benchmark over a market cycle. The algorithmic ratings, which Morningstar has been generating since June 2017, are meant to mimic the firms human analysts by considering the same factors, such as a funds fees, management turnover, track record and portfolio risks.