For years, a billionaire who shaped the way people across the world invest, drove every weekend from Chicago’s opulent Lincoln Park neighborhood back to Northwest Indiana.
Morningstar founder and Executive Chairman Joe Mansueto returned to Munster every Sunday to dine with his father, often at Giovanni’s Italian restaurant on Ridge Road.
Mansueto is being inducted into the 10th edition of The Times Business & Industry Hall of Fame. He built a huge and hugely influential company headquartered in the Loop that makes $800 million in annual revenue, does business in 27 countries worldwide and employs more than 4,500 worldwide. The company manages or advises more than $200 billion in assets.
“We’ve had a considerable impact over the last 30 years,” Mansueto said.
“We try to give investors confidence so hopefully they get better outcomes. We’ve offered independent, unbiased research and analysis to meet their investment needs. Our legacy is that we helped millions of people achieve better outcomes. We got letters from people thanking us for helping them save for their children’s college, buy a first house or prepare for retirement. I read them from time to time.”
Morningstar advises up to 10.9 million individual investors, 300,000 plan sponsors, 250,000 investment advisors and more than 1,300 institutions. Its research reaches hundreds of millions of people through those channels and online publication on websites like MSN. Morningstar's Workplace Solutions has $111.6 billion under management and advisement, while Morningstar Investment Management manages $94.7 billion in investments.
Forbes Magazine estimates Mansueto’s personal net worth is $2.2 billion.
Solid midwestern upbringing
Mansueto was born in Hammond and his parents moved to Calumet City when he was young. They moved back across the border to Munster where he attended Munster High School.
“I had a solid midwestern upbringing in Northwest Indiana,” he said. “We rode bikes and played a lot of sports. In those days, you could roam free.”
His father was an Italian immigrant who established a well-known ear, nose and throat practice at 509 Ridge Road. He also practiced at local hospitals where he met Mansueto’s mother, a nurse.
“When I was a kid, Northwest Indiana was thriving,” he said. “Hohman in downtown Hammond had Goldblatts and shopping. It was a wonderful place, a solid middle class community. It had the steel mills, big industry and heavy manufacturing.”
Mansueto said he had a great experience at Munster High School, where he was active in speech, debate and theater. He recently donated $1 million to fund a teacher merit award there.
Munster school board member John Friend said he was a bright guy who remembered every teacher he had 40 years ago. Friend said his family pulled itself up by the bootstraps.
Fine pines and awesome balsams
His first brush with entrepreneurship was in the Region. He sold Christmas trees on Hohman Avenue and 159th Street, and still remembers the sign: Fine pines and awesome balsams.
“It taught me how to put a business together,” he said. “I had to source trees, mark them up. It taught me how to put a business together, to fill a need and make some money on top of it. It was on a very small scale, but the lessons are still with me.”
He experimented with such ventures, including selling pop out of his dorm room.
“It was more out of curiosity,” he said. “I would conceive of an idea, see if it could make money and figure out how does it work.”
Mansueto ended up choosing the University of Chicago over Northwestern and Indiana universities. He liked its approach to education, that it was a liberal arts college with a Great Books philosophy. It taught him how to learn, analyze and develop arguments.
“I learned how to study an area in a very deep way and how to become the very best in your profession,” he said. “I learned the hard work and level of rigor needed. It taught me to develop sources and look at data to draw your own conclusions.”
Medicine was a popular career among undergrads there at the time, and his father wanted Mansueto to follow in his footsteps and become a doctor.
“It seemed too popular,” he said. “I thought I’d go a different path.”
The sun is but a morning star
He was reading Henry David Thoreau’s "Walden" in college. He thought it was a terrific book but was wondering how it would end.
He vividly remembers reading the final line, “The sun is but a morning star” in the library on campus.
“I looked out over the snow lightly falling, and thought, ‘What does that mean?’ ” he said.
“It just had a ring in my ear. It lingered with me when I was looking to name the company that was all about an independent perspective on investments. I thought about Thoreau’s self-reliance, value and thrift, and decided to name the company in honor of him.”
After business school, he came across Warren Buffett’s annual reports, which got him excited about investing. He became a lifelong devotee of Buffett, adopting the belief that businesses should find a moat that protects them from competition. It’s why he worked so hard to establish such trust in the Morningstar brand and reputation, and why the company built a deep database that would be hard to replicate.
As a recent college graduate working as a stock analyst for Harris Associates, he saw people were buying mutual funds, but weren’t making the best decisions. He saw the potential of mutual funds and wanted to help people sitting at the dining room table better understand them as they saved for retirement or their children’s college tuition.
It turned out, Mansueto was prescient.
When he started Morningstar in the early 1980s, mutual funds accounted for $300 million, or 13 percent, of investments. They’ve since grown to $16 trillion, or more than 40 percent.
“I knew they had a great future,” he said. “They were very fortunate and had a couple tailwinds, including a bull market and the widespread adoption of 401(k)s.”
A new tool for the smart investor
Mansueto started the company in his Lincoln Park apartment with $80,000 in savings. It was a small, one-bedroom apartment he picked out because he got the first few months rent-free.
He programmed code to track various stocks in a fund and then filled his living room with office desktops he bought from a Quill catalogue for $99 each, put a personal computer on each and hired people through an ad in the Chicago Reader to do data entry for the database he was building.
A full-page ad in Barron’s announced Morningstar’s Mutual Fund Sourcebook as “a new tool for the smart investor.” The response was great, and the money that came in covered the printing cost for the book and helped fund the business.
“The clients paid in advance, and that helped the business in the future,” he said.
The firm is widely credited with democratizing mutual fund investing by making it more accessible. Five-star rating systems were used to grade investments, and each company was evaluated in a single page, because it was a length a customer could read on a train or an advisor could copy and fax to a client, Mansueto said.
Morningstar was created to educate individual investors, but quickly found an audience with financial advisors and then was embraced by the institutions.
“Our analysis caters to the needs of investors,” he said. “We’re very mission-driven. We’re designed to help investors achieve better outcomes.”
Morningstar has repeatedly rolled out new products, such as a CD Rom, software and mobile databases. It went on to cover a much wider array of investment vehicles, including hedge funds, annuities, variable funds, exchange traded funds and other types of securities. The company now tracks more than 550,000 investment offerings.
“I look at business as a team sport,” he said. “Many people have had key roles, and we’ve tried to stay focused on investors and their needs. We’ve been conservative from a financial perspective, maintained a strong balance sheet and avoided any crazy acquisitions with tons of debt.”
Morningstar has been named a top workplace by Fortune Magazine, Glassdoor and the Chicago Tribune.
“We try to create an environment where people can build a career,” he said. “We’re not a churn environment where we work people hard until they leave. We’re looking to grow, develop and recruit the best people that align with what the company believes.”
Mansueto eventually decided to expand Morningstar around the world and take the company public, though he owns more than a majority share. At the beginning of this year, he stepped down as CEO, turning over the leadership role to Kunal Kapoor after he turned 60 and wanted more time to focus on his own interests. He’s now serving as executive chairman and is more focused on strategy and capital investments.
He said the move was a little bittersweet, but it gave him more flexibility with his time after three decades of running the day-to-day operations of the company.
“It’s like sending a child off to college,” he said. “You might not feel good about it, but the child should graduate and live a life of its own. If it doesn’t, something’s wrong.”
Mansueto is confident he built a company that will go on and stand the test of time.
“I’m most proud of helping people around the world put kids through college, fund their retirement or buy a first home,” he said. “It’s been very gratifying. It’s been very gratifying to build a living, breathing company that hopefully will last for several generations.”