Despite People Pillar weakness and an Average Process Pillar, Roundhill Sports Betting & iGaming ETF gets just enough right to retain its Morningstar Medalist Rating of Bronze. The strategy charges fees in line with its similarly distributed peers, priced within the middle quintile.  

 The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position in volatility exposure and an underweight in yield exposure compared with category peers. High volatility exposure is attributed to companies with a higher standard deviation of returns. And a low yield exposure is rooted in holding fewer stocks with high dividend or buyback yields -- instead, typically holding stocks in an early stage of development. The team managing this passive strategy earns a Low People Pillar rating. The strategy's parent organization doesn't stand out, earning the firm an Average Parent Pillar rating. It has displayed a handful of investor-friendly attributes including overall affordable fees but is held back by an unstable portfolio manager lineup.

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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. Roundhill Sports Betting & iGaming ETF earns an Average Process Pillar rating. The leading factor in 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. Low expenses across its parent firm's funds, whose fees, on average, rank in the second-cheapest quintile of their respective category, also contribute to the process. The pattern of low fees at the firm suggests that it is focused on delivering strong results for investors. 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 subpar 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 total return performance, before fees and expenses, of the Roundhill Sports Betting & iGaming Index.  Under normal circumstances, and at least 80% of the fund's net assets (plus borrowings for investment purposes) will be invested in securities issued by Sports Betting and iGaming Companies. The index tracks the performance of the common stock (or corresponding American Depositary Receipts ("ADRs") or Global Depositary Receipts ("GDRs")) of exchange-listed companies that earn revenue from online gaming ("iGaming"). The fund is non-diversified. 

 The portfolio is overweight in consumer cyclical by 9.0 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 consumer defensive, underweight the average by 7.3 and 4.3 percentage points of assets, respectively. The portfolio is composed of 43 holdings and is about as top-heavy as the category average, with 49.7% of assets in the top 10 holdings. And in closing, in terms of portfolio turnover, this fund trades less frequently than the category’s average, potentially limiting costs to investors.

Average

Process

Roundhill’s team remains inferior, compared with better-resourced rivals, resulting in a Low People Pillar rating. There are three managers listed on the fund: Gabriel Tan, Andrew Serowik, Todd Alberico. The team is largely unproven, as its members only average three years of portfolio management experience. Together, they manage a total of 23 strategies, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha relative to the category median in aggregate.

People

Roundhill is an industry-standard asset manager, leading to an Average Parent Pillar rating. A strength of Roundhill is that its product shelf of open-end and exchange-traded funds is, on average, offered at a minimal cost, suggesting that it considers what's best for its investor base. On average, fees for funds are in the second-cheapest quintile of respective category peers. Roundhill has undergone a bout of turnover in the past five years, as seen in its lower-than-average portfolio manager retention. This is a concern, as long-term stability tends to support positive results. With an average five-year Morningstar Rating of 1.0 stars, the risk-adjusted performance of Roundhill's open-end and exchange-traded funds falls short of competitors.

Parent

Roundhill Sports Betting & iGaming ETF

BETZ tracks a tier-weighted index of global companies selected by committee that are involved in the sports betting & iGaming industry.

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