The combination of a middling Process Pillar rating and a Low People Pillar rating limit  Roundhill S&P Dividend Monarchs ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers. The strategy changed its peer group in March, moving from the Large Value category to the Mid-Cap Value Morningstar Category. 

 The team managing the passive strategy earns a Low People Pillar. The strategy merits an Average Process Pillar rating.  Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The strategy's parent firm has some investor-friendly attributes, like overall attractive fees, but it is held back by an unfavorable lineup success ratio. As a result, the firm gets an Average Parent Pillar rating.

Analyst Rating

Black Hills

Sonoco Products

Federal Realty Investment Trust

National Fuel Gas

Kenvue Inc

Kimberly-Clark

Coca-Cola

AbbVie

Archer-Daniels-Midland Company

Stanley Black & Decker

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Roundhill S&P Dividend Monarchs ETF earns an Average Process Pillar rating. 

The most significant contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. The size of the portfolio management team also reinforces the process. With four portfolio managers, the fund is reasonably well-resourced. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 0%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup.

 This strategy prefers larger market-cap companies compared with the average fund in its peer group, the Mid-Cap Value Morningstar Category. But in terms of style (value/growth) exposure, it is similar. Examining additional factor exposure, this strategy continually held some stocks with low trading volume over the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has also demonstrated a bias towards lower-momentum stocks over its peers over the past years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. Additionally, this strategy has exhibited a tilt toward low-volatility stocks in these years, meaning companies with a lower historical standard deviation of returns over its peers. Such holdings can limit a strategy's downside, but cause it to lag in bull markets. In recent months, the strategy also had less Volatility factor exposure than its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in consumer defensive and utilities relative to the category average by 25.5 and 3.9 percentage points, respectively. The sectors with low exposure compared to category peers are financial services and technology, underweight the average by 15.2 and 10.2 percentage points of assets, respectively. The strategy owns 42 securities and is relatively top-heavy. Of the strategy's assets, 40.3% are concentrated within the top 10 holdings, compared to the typical peer's 17.7%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 0% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Average

Process

Roundhill’s team earns a Low People Pillar rating. The primary detractor from the rating is the experience of the management team, which averages four years at this fund. The instability of talent across its parent firm also holds the team back. The firm's asset-weighted manager tenure of two years suggests it could do more to retain portfolio managers. The parent firm's five-year success ratio of 0% further detracts from the team. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

People

In a competitive industry, Roundhill doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One notable advantage of Roundhill is its below-average fees. On average, the firm's open-end and exchange-traded fund fees fall in the second-lowest quintile of category peers. Roundhill strategies have failed to have lengthy success. In particular, the firm's three-year success ratio demonstrates that only 0% have both survived and beaten their respective category median. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development. With an average three-year Morningstar Rating of 1.3 stars, the risk-adjusted performance of Roundhill's open-end and exchange-traded funds falls short of competitors.

Parent

Roundhill S&P Dividend Monarchs ETF

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KNGS is the first ever U.S. listed ETF to track the performance of S&P Dividend Monarchs Index, an elite group of blue chip U.S. companies that have grown their dividends for 50+ consecutive years. NEW YORK , Nov. 2, 2023 /PRNewswire/ -- Roundhill Investments, an ETF sponsor focused on innovative financial products, is pleased to announce the launch of the Roundhill S&P Dividend Monarchs ETF (KNGS), which begins trading on the NYSE Arca today.

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