Weakness in American Customer Satisfaction ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Neutral. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in liquidity exposure and an underweight in quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The team managing this passive strategy earns a Below Average People Pillar rating. The strategy's parent organization is industry standard, albeit with some strong attributes like overall reasonable fees, but is held back by a low success ratio across its lineup. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Apple

Costco

Alphabet

Amazon

Microsoft

JPMorgan Chase & Co

Keurig Dr Pepper Inc

UnitedHealth Group

Humana

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. American Customer Satisfaction ETF earns a Low Process Pillar rating. The most significant detractor from the rating is the fund's unremarkable long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 67% also detracts from the process. The parent firm's five-year risk-adjusted success ratio of 0% further limits the process. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's relatively low success ratio suggests that the firm could do better across its fund lineup.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the performance of the American Customer Satisfaction Investable Index.  Under normal circumstances, at least 80% of the fund's net assets, plus borrowings for investment purposes, will be invested in investments that are tied economically to the United States. Construction of the index begins with over 400 ACSI Companies across 46 industries and 10 economic sectors. The initial universe is then screened to eliminate companies whose stock is not principally listed on a U.S. exchange, whose market capitalization is less than $1 billion, and or for which the Customer Satisfaction Data is statistically insignificant. 

 The portfolio is overweight in consumer cyclical and communication services relative to the category average by 16.7 and 9.5 percentage points, respectively. The sectors with low exposure compared to category peers are technology and healthcare, underweight the average by 12.0 and 8.0 percentage points of assets, respectively. The portfolio has 34 holdings and is similarly diversified as peers, with 48.5% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, on a year-over-year basis, 54% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Process

Exponential ETFs’s team earns a Below Average People Pillar rating. The team benefits from the firm's five-year retention rate of 67%. However, the rating is held back by the combined average five-year excess return of each manager, which shows that the funds they manage have fallen short of their respective category average. The instability of its management team also limits the team. The fund last saw a manager change three years ago.

Below Average

People

Exponential ETFs's track record as a steward is mixed, leading to an Average Parent Pillar rating. The firm charges fees for its open-end and exchange-traded funds on par with category peers. On average, fees on its funds are in the middle quintile of category peers, giving it neither an advantage nor disadvantage compared with the competition.  With an average three-year Morningstar Rating of 1.0 stars, the risk-adjusted performance of Exponential ETFs's open-end and exchange-traded funds falls short of competitors.

Average

Parent

American Customer Satisfaction ETF

ACSI tracks an index of tier-weighted US large-cap companies assigned with the highest customer satisfaction scores. Holdings are weighted equally within each industry.

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