Despite People Pillar weakness and an Average Process Pillar, ProShares MSCI Trnsfmtnl Chngs ETF gets enough right to retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers. The strategy changed its peer group last October, moving from the Technology category to the Large Growth Morningstar Category. 

 The strategy receives an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight in liquidity exposure and volatility exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And high volatility exposure is rooted in stocks that have a higher standard deviation of returns. 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 affordable fees, but is held back by a bench of limited-tenure portfolio managers. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Rogers

AbbVie

Danaher

Johnson & Johnson

Abbott Labs

McCormick

International Flavors & Fragrances

DoorDash

Apple

Booking Hlds

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. ProShares MSCI Trnsfmtnl Chngs ETF earns an Average Process Pillar rating. The most important driver of the rating is that this fund tracks an index. Historical data, like Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Management team experience, which averages 16 years at this fund, also supports the rating. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 43%. 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 investment results, before fees and expenses, that track the performance of the MSCI Global Transformational Changes Index (the "index").  The index selects companies which may benefit from transformational changes in how people work, take care of their health, and consume and connect ("Transformational Changes") - changes accelerated by COVID-19. The fund will generally use a “replication strategy” to achieve its investment objective, and meaning that it will invest in all of the component securities of the index in approximately the same proportion as the index. 

 The portfolio is overweight in healthcare and basic materials relative to the category average by 9.3 and 8.8 percentage points, respectively. The sectors with low exposure compared to category peers are technology and consumer cyclical, underweight the average by 11.2 and 5.8 percentage points of assets, respectively. The portfolio is positioned across 175 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 24.8% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 54.4% average. And in closing, in terms of portfolio turnover, this portfolio turns over its holdings less quickly than peers, potentially leading to lower costs for investors and eliminating a drag on performance.

Average

Process

ProShares’s team receives a Below Average People Pillar rating. The team is strengthened by the strategy's costs, which rank in its category's least costly fifth. A higher expense ratio reduces net returns, so low costs give this team an advantage. However, the rating is limited by the parent firm's five-year success ratio of 36%. The measure indicates the percentage of a firm's funds that survived and beat 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. The parent firm's five-year retention rate of 58% also detracts from the team.

Below Average

People

In a competitive industry, ProShares doesn't differentiate itself enough, leading to an Average Parent Pillar rating. One area of strength is the firm’s favorable fees for open-end and exchange-traded funds, demonstrating a firm-wide commitment to minimizing costs and maximizing investors’ returns. Fees for funds are, on average, within the second-cheapest quintile of similarly distributed strategies. Longest-tenured managers’ average asset-weighted tenure within the firm is ten years, bringing a wealth of knowledge through a complete market cycle and ultimately contributing positively to the rating. Despite other redeeming qualities as a firm, ProShares has seen some disruption among its portfolio management ranks in the past five years, denoted by elevated turnover compared to peer asset-management firms. Long-term stability tends to support positive results.

Parent

ProShares MSCI Transformational Changes ETF

ANEW tracks a market-cap-weighted index of global stocks that benefit from transformational changes in peoples work, health care, consumption, and connection.

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