At the Hubbis Malaysia Wealth Management Forum on May 22, Nicolas Gisbert, Head of Strategic Partnerships for Asia at Morningstar Research, delivered a wide-ranging and insight-rich presentation on smarter fund selection in a world where choice is expanding and complexity deepening. Drawing on Morningstar’s long-standing heritage as a trusted research and data provider, Gisbert laid out how financial professionals can bring clarity and discipline to the fund selection process, leveraging technology, transparency, and rigorous methodology to empower better investment outcomes.
Morningstar’s Mission: Empowering Investor Success
Gisbert began by reaffirming Morningstar’s core mission to “empower investor success,” a principle that underpins all its research and analytics. He noted that Morningstar’s goal is not just to improve investment outcomes for clients, but to contribute positively to the entire industry. “We wake up every day trying to improve transparency, maintain independence, and take a long-term perspective,” he explained, describing these three values as Morningstar’s guiding pillars.
Although Morningstar is perhaps most widely recognised for its iconic star ratings, Gisbert clarified that its real strength lies in the breadth of its global data and the depth of its analyst-driven insights. “We are the largest independent research house globally—and we are not paid by fund issuers. That independence is critical to the trust we have built,” he said.
A Market Overloaded with Choice—and Risk
Gisbert highlighted that fund selectors today are navigating an increasingly crowded and complex marketplace. The proliferation of investment products, from ETFs to private assets and thematic strategies, has dramatically widened the investment universe. “Investment choice has exploded,” he observed, noting that even retail investors are now participating in previously inaccessible markets. While this trend has expanded opportunity, it has also introduced a higher risk of misjudging product quality, liquidity, or suitability.
Technology has played a dual role in this environment. It has facilitated access to more instruments, but it has also raised the bar for informed analysis. Gisbert explained that Morningstar has responded by expanding its data coverage to over five million instruments globally—spanning both public and private markets—while also developing tools to help users cut through the noise. “Fund selectors today face more choice than ever, but also more risk of misjudging performance, liquidity, or suitability,” he warned.
Building a Smarter Fund Selection Framework
Gisbert introduced Morningstar’s structured approach to fund selection, a five-step methodology that aims to bring discipline and rigour to the decision-making process. The first step involves defining the investment universe, which requires fund selectors to isolate a manageable subset from the overwhelming array of available funds based on parameters such as geography, asset class, and sector focus.
The next step is to apply quantitative screens, although Gisbert cautioned against an over-reliance on historical performance. “We all know the phrase: past performance is not indicative of future returns. So why keep relying on it?” he asked, urging selectors to focus instead on indicators such as alpha generation, active share, cost efficiency, and risk-adjusted returns.
To complement this, Morningstar layers in a qualitative overlay conducted by its team of over 200 analysts. This forward-looking research evaluates the “people, process, and parent” behind a fund, aiming to assess its potential to generate long-term alpha. “Our analysts focus on forward-looking alpha potential, not past glory. That’s why our ratings are so valuable—they’re grounded in discipline and foresight,” said Gisbert.
Beyond investment performance, selectors must conduct operational due diligence—assessing governance, transparency, and risk controls. The final step is integration into client portfolios, which involves stress-testing the fund’s role within a broader asset mix. Morningstar’s “x-ray” tools are instrumental in this process, helping wealth managers identify potential concentration risks or style drifts. “Fund selectors must move from product picking to portfolio thinking. Understand not just the fund, but the role it plays,” Gisbert explained.
Enhancing the Selector’s Toolkit with Data & Ratings
Gisbert emphasised that Morningstar supports selectors across this framework with a wide spectrum of data, analytics, and ratings. The firm’s toolkit includes everything from high-level screens to granular holdings-level data, ESG factors, and automated scorecards. He noted that Morningstar’s well-known Gold, Silver, and Bronze analyst ratings are based not on recent performance, but on a fund’s long-term potential to outperform. These assessments are grounded in a rigorous research process that includes 4,000 individual data points.
“We produce research and ratings across multiple asset classes and help investors build portfolios—not just choose products,” he explained, adding that Morningstar also supports index construction and provides APIs for integration with advisor platforms.
Portfolio Personalisation, ESG, and the Role of AI
One of the most meaningful shifts in fund selection, Gisbert argued, is the move towards personalisation. ESG investing has catalysed a broader demand for bespoke portfolios that reflect individual values, sector preferences, or exclusions. “ESG wasn’t just a trend—it triggered a broader shift toward personalised portfolios. AI will accelerate that,” he commented.
Morningstar has built its tools to enable this personalisation, providing investors and advisors with clarity on how funds align with sustainability goals. Meanwhile, the firm is using artificial intelligence and machine learning to expand its research coverage, particularly in under-analysed areas like small and mid-cap funds. “We’re using machine learning to enhance ratings, extend coverage to smaller funds, and improve efficiency internally,” Gisbert said.
Public-Private Convergence and the Future of Manager Selection
Gisbert also addressed the growing convergence between public and private markets. Investors are increasingly able to access both, and Morningstar’s role, he said, is to help unify these perspectives. This requires integrated analytics that offer a coherent view across liquidity spectrums, which Morningstar is actively developing. He remarked that passive funds continue to gain ground, but that actively managed funds still play an important role—especially those with demonstrable alpha generation potential.
Common Pitfalls: Lessons from the Field
Gisbert closed his presentation with a candid look at the most common mistakes in fund selection. Chief among them is performance chasing, which he called a persistent but misguided habit. He also pointed to the underestimation of fees, warning that “fees eat into client returns. Low-cost alpha is hard to find, but worth the effort.”
He stressed the importance of diversification, noting that many portfolios suffer from excessive overlap or unbalanced exposures. Another key pitfall is neglecting to monitor fund managers. “Managers change,” he noted, and when they do, it can dramatically affect strategy outcomes. Morningstar places high scrutiny on such changes in its analyst oversight.
Final Thoughts
In a landscape increasingly shaped by product proliferation, client personalisation, and technological advancement, the role of the fund selector has never been more complex—or more critical. Nicolas Gisbert’s presentation made clear that success in this environment hinges on disciplined processes, transparency, and the intelligent application of data and research. “It’s not just about picking winners,” he concluded. “It’s about helping investors succeed—and that starts with smarter choices.”
