Weakness in Brookstone Active ETF's People and Process Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the second-costliest quintile among peers.  

 The strategy's inexperienced portfolio management team drives the strategy's Below Average People Pillar. The strategy earns a Below Average Process Pillar rating.  To be considered a quality steward, this strategy's parent organization needs to improve factors like a lack of inside investments from portfolio managers and relatively short-tenured portfolio managers. As a result, the firm obtains a Below Average Parent Pillar rating.

Analyst Rating

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Morningstar's evaluation of this fund's process seeks to determine how repeatable, consistent, and reliable it is, and whether management maintains a competitive advantage. Brookstone Active ETF earns a Below Average Process Pillar rating. The process is bolstered by the firm's five-year retention rate of 100% over the period. However, the rating is limited by the experience of the management team, which averages four years at this fund. High costs across its parent firm's funds, whose fees rank in their respective category's second-costliest quintile on average, also hold the process back. While this fund's costs are most relevant to investors, the pattern at the broader firm suggests it could do more to keep fees low.

 Its equity sleeve has a consistent bias toward both larger market-cap and growth-oriented stocks compared with the category average. The strategy has three region or sector biases compared to category peers. The most meaningful is its consistent underweight in the Developed Europe region. It also routinely positions more assets in the technology sector. And finally, in the fund's most recent portfolio, more assets were allocated to developed markets regions. Although, this bias has not existed over time. 

 The portfolio is overweight in technology by 5.3 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and financial services; however, the allocations are similar to the category. The portfolio is overweight in North America by 14.7 percentage points compared with the category average, and Emerging Europe's allocation is similar to its peers. The regions with low exposure compared to their category peers are Developed Europe and United Kingdom, with Developed Europe underweight the average by 6.5 percentage points and United Kingdom similar to the average.

 For the portfolio's bond allocation, interest rate risk exposure is being managed higher than comparable managed products in this category. However, compared with peers, credit risk has been somewhat lower. More concretely, the portfolio's average credit rating is A compared with the category average’s BBB but possesses a longer average duration of 6.2 years as opposed to the category average's 5.1 years.

Below Average

Process

Brookstone Active ETF earns a Below Average People Pillar rating. The team is strengthened by the firm's five-year retention rate of 100%. However, the rating is limited by the experience of the management team, which averages four years at this fund. The number of months that the management team has been running this vehicle together also holds the rating back. Since this is a newly incepted product, more time is needed to monitor the team's capability at executing the strategy.


Mark W. DiOrio, the longest-tenured manager on the strategy, boasts 17 years of listed portfolio management experience.  Although the team size is solid, together they are largely unproven. With four additional supporting listed managers, the team averages four years of listed portfolio management experience.

People

Brookstone Asset Management, with only six months of history as a firm, is too nascent to prove whether it has an edge over the competition, leading to a Below Average Parent Pillar rating. The firm currently manages eight vehicles, with a total of $337.5 million under management across a bench of five strategy managers. The management team at Brookstone Asset Management is unproven. Because the team members average just over four years in the industry, there's reason to be cautious until they grow more seasoned. The firm's earliest portfolio manager hire, Mark W. Diorio, has 17 years of industry experience. 
 
   

 As Brookstone Asset Management builds and continues to develop a track record, its rating will be adjusted accordingly.

Parent

Brookstone Active ETF

BAMA is an actively managed fund-of-funds that seeks to provide total return by investing in stocks, bonds, and cash and cash equivalents. The fund typically allocates 40%-80% of its assets in stocks.

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It was another strong week for launches, with 21 new ETFs added to the industry count. That number includes funds from Capital Group, Dimensional, American Century, BlackRock, J.P.

News for Brookstone Active ETF ETF (BAMA)