A sound investment process and strong management team underpin SmartETFs Asia Pcfc Dvdnd Bldr ETF's Morningstar Medalist Rating of Gold. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in volatility exposure and an overweight in yield exposure compared with category peers. Low volatility exposure is attributed to stocks with a lower standard deviation of returns. And a high yield exposure is rooted in holding high dividend-paying or buyback stocks. The longest-tenured manager's extensive experience drives the strategy's High People Pillar rating. The strategy's parent firm is solid; it, for instance, has had a favorable lineup success ratio. However, it still needs to improve low portfolio manager retention. The firm's multiple strengths merit an Above Average Parent Pillar rating.

Analyst Rating

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QUALCOMM

Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category index on a risk-adjusted basis over the long term. SmartETFs Asia Pcfc Dvdnd Bldr ETF earns a High Process Pillar rating. 

The most important driver of the rating is its parent firm's excellent long-term risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 4.5 stars. The parent firm's five-year risk-adjusted success ratio of 100% also influences the rating. 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. Their commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The firm's five-year retention rate of 90% supports the rating as well.

 This strategy tends to hold smaller, more value-oriented companies compared with its average peer in the Pacific/Asia ex-Japan Stk Morningstar Category. Analyzing additional factors, this strategy has consistently exhibited a tilt toward low-volatility stocks or companies whose shares have a history of lower standard deviation of returns, compared with its Morningstar Category peers in recent years. These companies have historically been a valuable ballast to steady portfolio returns during market downturns. In the latest month, the strategy was also less exposed to the Volatility factor compared with Morningstar Category peers. This strategy's portfolio also has had exposure to more stocks with high dividend or buyback yields over peers in these years. Stocks with high yields can be more stable, mature companies, but at times extreme market pressure or fundamental deterioration may prompt them to cut their dividends, which tends to hurt stock performance. Compared with category peers, the strategy also had more exposure to the Yield factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. In recent months, the strategy also had less Quality 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 real estate and technology relative to the category average by 5.5 and 3.9 percentage points, respectively. The sectors with low exposure compared to category peers are basic materials and communication services, underweight the average by 6.2 and 4.6 percentage points of assets, respectively. The portfolio is composed of 39 holdings and is similarly diversified as peers, with 31.3% of portfolio assets concentrated within the top 10 holdings. And finally, in terms of portfolio turnover, this fund trades less regularly than the typical peer in its category, which may result in a lower cost to investors.

High

Process

Despite managers' lack of personal investments, SmartETFs Asia Pcfc Dvdnd Bldr ETF benefits from a strong longest-tenured manager. As the latter outweighs the former, the strategy earns a High People Pillar rating. The team is backed by Edmund Harriss, the longest-tenured manager on the strategy, who provides over 25 years of portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.2 stars, indicating that their risk-adjusted returns have been in line with the category average. Despite having a small team, the two listed managers boast 22 years of portfolio management experience. As a team, they manage five investment vehicles together, with a Silver asset-weighted average Morningstar Medalist Rating, indicating the potential to deliver positive alpha in aggregate.  None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

People

SmartETFs has a strong investment culture as a firm, resulting in an Above Average Parent Pillar rating. However, portfolio manager retention could be an area of improvement for the firm. SmartETFs has had higher turnover over the past five years, compared to peers, possibly signaling an unstable investment-team culture. SmartETFs has showcased a durable product shelf. This is demonstrated by the firm's five-year risk-adjusted success ratio of 100%, meaning that 100% of its products have both survived and beaten their respective category median on a risk-adjusted basis. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. Average asset-weighted tenure of nine years among the longest-tenured managers at SmartETFs is on par with peer firms. In isolation, seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions.

Above Average

Parent

SmartETFs Asia Pacific Dividend Builder ETF

ADIV actively invests in Asia Pacific companies expected to have an increase in dividends over time.

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Expect Asia to Offer Attractive Dividends and Growth Over Coming Years

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