Morningstar to Launch Public-Private Model Portfolios With Funds From Apollo, Franklin Templeton, JPMorgan

Strike a pose.

Yes, we’re talking about models: not the kind wearing Rick Owens and Coco Chanel, but the ones running advisor portfolios. Morningstar Wealth is partnering with major asset managers to launch six model portfolios later this year that combine traditional ETFs and interval funds. Apollo and Franklin Templeton will handle private investments, and Franklin and JPMorgan will manage the public ones. The portfolios will be Morningstar’s first designed to provide exposure to both public and private markets for advisors. 

The launch reflects a broader shift in wealth management as advisors increasingly outsource investment management through model portfolios, while looking for ways to add private-market exposure for clients. Model portfolios are now used by more than 80% of fee-based advisors and collectively oversee roughly $8 trillion in assets. For many advisors, outsourced models offer a way to access specialized asset classes without having to become experts in them.

“The next generation of model portfolios will blend public and private markets, and offer investors greater diversification, more yield and better reflect the full breadth of the economy,” Apollo president Jim Zelter said in a statement.

A Little Privacy, Please

Private markets have historically been the domain of institutional and accredited investors, but as companies stay private longer and policymakers push for broader access, private equity, private credit and private real estate are becoming more readily available. “When I think about why private markets matter now more than ever, it’s not just access but also focus on the long term in a short-term world,” Franklin Templeton CEO Jenny Johnson said in a statement. “We are living in an environment of persistent inflation and structural uncertainty.” 

As for Morningstar’s new models:

• The portfolios will span a range of objectives, from capital preservation to aggressive growth. 
• Initial allocations to private credit and private real estate will come through interval funds, and are expected to account for roughly 12% to 20% of portfolio assets, depending on risk profile and market conditions.
• Morningstar says the portfolios will offer transparency, competitive pricing and include no overlay fees.

Keep it Private. Not everyone is convinced wider access is a good idea, though. Critics argue that private assets often come with higher fees, limited liquidity and less transparency than public investments, making them potentially unsuitable for many mass-affluent investors, especially when it comes to their 401(k)s. 

Advocacy group Better Markets has been particularly vocal, arguing that the narrative that investors are increasingly demanding private assets is not entirely accurate and that the private funds industry needs a new source of capital. “The private funds industry now wants to get its hands on the trillions of dollars in retail investors’ retirement savings,” Benjamin Schiffrin, director of securities policy at Better Markets, said in a March statement.

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