Motivated by the puzzling report of the observation of a ferromagnetic insulating state in LaMnO$_3$/SrTiO$_3$ heterostructures, we calculate the electronic and magnetic state of LaMnO$_3$, coherently matched to a SrTiO$_3$ square substrate within a strained-bulk geometry. We employ three different density functional theory based computational approaches: (a) density functional theory (DFT) supplemented with Hubbard U (DFT+U), (b) DFT + dynamical mean field theory (DMFT), and (c) a hybrid functional treatment of the exchange-correlation functional. While the first two approaches include local correlations and exchange at Mn sites, treated in a static and dynamic manner, respectively, the last one takes into account the effect of non-local exchange at all sites. We find in all three approaches that the compressive strain induced by the square substrate of SrTiO$_3$ turns LaMnO$_3$ from an antiferromagnet with sizable orbital polarization to a ferromagnet with suppressed Jahn-Teller distortion in agreement with experiment. However, while both DFT+U and DFT+DMFT provide a metallic solution, only the hybrid calculations result in an insulating solution, as observed in experiment. This insulating behavior is found to originate from an electronic charge disproportionation. Our conclusions remain valid when we investigate LaMnO$_3$/SrTiO$_3$ within the experimental set-up of a superlattice geometry using DFT+U and hybrid calculations.
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