Portfolio X-Ray is a Morningstar component that enables an adviser to understand the fundamental characteristics of client portfolios. The functionality allows to screen a particular asset as a whole and not breaking down into transaction level. The Portfolio X-Ray tool enables the adviser to explore true asset allocation while uncovering exposure to various investment styles, geographic regions, sectors, and more. It provides insights to Advisors giving them crystal clear ideas on diversification quality of an overall portfolio across varied criteria.
Step to Access Portfolio X-Ray
- Select a client and hover to reports tab. You would find Portfolio X-Ray in the options available in the drop-down.
- Portfolio X-Ray homepage appears as below.
- The top left corner has an option to “View Holdings & Benchmarks” of Australian Shares and Managed Funds registered with Morningstar along with its Amount, Weights and Units. Once this tab is expanded, there is a “search option” to search and add Australian Shares and Managed Funds, highlighted in yellow.
- Under the same “View Holdings & Benchmarks” tab, there’s a list of benchmarks, which when selected, applies to the portfolio tiles like Stock Sector, Stock Region, Stock Stats, Performance Graph and Trailing Returns for current portfolio comparison. More on Portfolio Tiles is explained in the later section of this article
- “Generate Report” option allows to extract the Portfolio X-Ray Report in pdf format. This tab is located at the top right corner, highlighted in red in the above screenshot.
Upon clicking “Generate Report”, the below screen appears. The details are to be filled in Cover page details (all field are optional). You can also uptick Cover page option and then go ahead and Click Generate. The report gets generated in a new link for preview, download and to be sent to the Client.
Some Important Points of Consideration in Portfolio X-Ray
- Portfolio X-ray takes into consideration the asset/liabilities section. Screening of a particular asset is done as a whole and not on transaction level data.
- Only those assets are included in Portfolio X-Ray which are included in Morningstar Fund report. To be specific, only “Managed Funds” and “Australian Shares” are taken into consideration since they are registered with Morningstar.
- The data of registered assets (Managed Funds & Australian Shares) flows into asset allocation, stock sectors, stock regions, stock stats, stock style tiles. More information on Portfolio Tiles is provided below:
Asset Allocation allows Portfolio X-Ray to scan all the assets available under Assets (Australian Shares and Managed Funds) and registered with Morningstar. Once the screening is done, the tile allocates an asset class to the portfolio.
Stock Sectors classifies equity portion of the portfolio under three categories:
Cyclical - A cyclical stock is affected by macroeconomic or systematic changes in the overall economy. Cyclical stocks are known for following the cycles of an economy through expansion, peak, recession, and recovery. Example: Real estate, Financial services, etc.
Sensitive - Stocks which are not heavily impacted by changes in economy but do tend to move in line with them. Example: Communication, Energy, Technology, Manufacturing, etc.
Defensive - A defensive stock is one which provides consistent dividends and stable earnings regardless of the state of the overall stock market. There is a constant demand for their products and is immune to economic cycles. Example: Healthcare, Utilities, Food, etc.
Stock Regions illustrates the presence of the portfolio across geographical regions and is depicted on the world map. It is a three tabs section on top of the Tile - Greater Asia, Greater Europe and America.
This tile allows the advisors to gain a quick overview of the portfolio weightage for a specific geographic region. An advisor uses this information to take meaningful client-centric decisions and prepare himself from the financial market fluctuations across different geographies. The benchmark field provides the stats of benchmark as selected in “View Holdings and Benchmark” field and assist in comparing gaps between current and benchmark portfolio.
Stock Stats tile calculates below ratios:
Price/Prospective Earnings: It relates a company's share price to its earnings per share.
Price/Book Ratio: It measures the market's valuation of a company relative to its book value.
Price/Sales Ratio: It is a valuation ratio that compares a company’s stock price to its revenues.
Price/Cash Flow Ratio: It is a stock valuation indicator or multiple that measures the value of a stock’s price relative to its operating cash flow per share.
This tile shows the portfolio performance over a period. The existing portfolio is assumed to be present in previous periods of year to show portfolio performance. A performance graph can be seen for the past 1 year, 2 years, 3 years, 5 years, and 10 years.
A trailing return looks backward from a particular date for a fund's annualized return over a specific time period - usually ending on the last day of the most recent day, month, quarter, or year.
This tile shows Trailing returns of the Portfolio for last 1 Month, 3 Months, 6 Months, 1 Year, YTD, 3 Years Annualised, 5 Years Annualised and 10 Years Annualised.
Different investment styles often have different levels of risk and lead to differences in returns. Therefore, this tile is a crucial indicator to see style exposure.
For stock funds, the style box represents the portfolio's style based on the value - growth orientation of the stock holdings as Value, Blend and Growth, and funds are classified as Large- cap, Mid-cap, or Small-cap based on the market capitalization of the fund’s stock holdings.
It creates a matrix of Portfolio Style and holding into nine possible combinations of these characteristics.
Fixed Income Style
Fixed income tile represents duration, interest-rate sensitivity and credit quality for bonds. The Fixed income style box is displayed both in the case of a bond-based fund or balanced fund.
- Style Box
- Interest Rate Risk
Interest rate risk is the potential that a change in overall interest rates will reduce the value of a bond or other fixed-rate investment. It reflects average effective maturity, average effective duration and average credit quality.
Fixed income details for bond funds represent duration, or interest-rate sensitivity (short, medium, or long), and credit quality (high, mid, or low).
- Credit Quality
Displays the Credit Quality of the Bonds in the portfolio, AAA being the highest rating, Below B being lowest and NR is Not recognized.
Fees and Expenses
Depicts the weighted average fee and management fees for portfolios.
Highlights the holding of the client’s portfolio. It is divided into two tabs
Top holdings - This tile shows the top Portfolio holdings of the Client.
Stock Overlap - A stock that is owned independently as well as under a managed fund or a certain custom product or as a part of multiple funds, will appear here.
Points To Note:
Since transaction level data is not used while screening of assets in Portfolio X-Ray, calculation of past performance and performance graph is based on a hypothetical performance illustrator. It assumes the same portfolio was available in the past as well.
Portfolio X-Ray will be provided as access management just like “Client Access”. As a product development feature, Portfolio X-Ray will by default be switched off for all the clients of the user.
- The recent enhancement in the Portfolio X-Ray will now offer visibility to the individual client portfolios as well multiple portfolio
- This will now help the adviser have a clear understanding on how all the individual portfolios are performing.
For more details, refer to the Portfolio X-Ray Enhancements article.