How Blockchains Will Disintermediate Morningstar and their Mutual Fund Ratings

The Wall St. Journal recently did an expose on the firm, Morningstar, that rates mutual funds.

What they discovered is that, like the ratings agencies that violated our trust during the Big Short era, that the firm didn’t really add much value in terms of its ability to predict which funds would perform well over the long term and which wouldn’t.

I haven’t analyzed all of the data nor the methodology that the WSJ used, but on the surface, this looks like another example of a centralized institution, lacking transparency, with possible conflicts of interest.

It’s no surprise then that protocols and services such as Melonport and Prism are emerging.

You (and anyone) will be able to see the detail of each fund’s activities (though you may not know their trading strategy) and assess for yourself if there’s value there.

At some point, analytical tools will emerge to look across all of these funds and via a crowd-sourced or AI/machine-learning approach, the predictive models will improve to the point that Morningstar gets disintermediated.

Simply put…if you are a trust broker (and Morningstar is), you are in the cross-hairs of this disruption.