The combination of a middling Process Pillar rating and a Below Average People Pillar rating limit  Build Bond Innovation ETF to a Morningstar Medalist Rating of Neutral.  The portfolio maintains a sizable cost advantage over competitors, priced within the second-cheapest fee quintile among peers.  

 The team managing the strategy earns a Below Average People Pillar. The strategy earns an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant underweight position in AA rated bonds and debt with 10- to 15-year maturities compared with category peers. The strategy's parent organization is industry standard, albeit with some strong attributes like low portfolio manager turnover and overall low fees. This earns the firm an Average Parent Pillar rating.

Analyst Rating

Morningstar's style-agnostic investment process evaluation looks for strategies that should be able to outperform their Morningstar Category index on a risk-adjusted basis over time. Build Bond Innovation ETF earns an Average Process Pillar rating.    The leading factor in the rating is the firm's five-year retention rate of 100% over the period. The fund's concentrated portfolio, with its top 10 holdings accounting for 55% of assets, supports the rating. High-conviction picks court the risk of blowing up, but can also drive outperformance. Lastly, the process is limited by the experience of the management team, which averages two years at this fund.

 Compared with other funds in the Intermediate Core Bond Morningstar Category, this fund maintains significantly lower interest-rate sensitivity through historical portfolios. But in terms of long-term credit risk, it is on par with peers over the past few years. Opening the analysis to additional factors, the portfolio has displayed biases over time, whether towards or away from certain fixed-income instruments. Compared with the category average, the managers have been meaningfully underweight AA rated bonds in recent years. In the latest month, the strategy has also relatively underweighted AA rated bonds compared with Morningstar Category peers. Additionally, there's been a notable bias away from debt with 10- to 15-year maturities over the past few years. Similarly, in recent months, the strategy also had less exposure to debt with 10- to 15-year maturities than peers. Finally, during the past few years, the fund leaned meaningfully away from securitized debt. In recent months, the strategy also had less exposure to securitized debt compared to its peers.

 This strategy has a 4.3% 12-month yield, higher than its average peer's 3.6%. In addition, it has a 4.7% 30-day SEC yield (a measure similar to yield-to-maturity). Typically, higher yields come at the cost of higher credit risk. But that isn't always the case. Over the past 12 months, the average yield of the fund has been higher than the average yield of its Morningstar Category peers. The portfolio's average surveyed credit quality is on par with peers, with both the fund and the average being rated A.

Average

Process

Build Bond Innovation 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 held back by the experience of the management team, which averages two 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.

Below Average

People

Since its inception two years ago, Build has demonstrated that it will hold its own as a steward of capital, warranting an Average Parent Pillar rating. Build currently manages one vehicle, with a total of $8.0 million under management and one portfolio manager. As a consequence of being a new firm, its solo manager brings limited experience, with only two years under their belt.  

 The firm runs moderately priced open-end and exchange-traded funds, with the average net expense ratio falling within the middle quintile of firms.  

 To retain an Average rating, Build will be expected to maintain a consistent track record of positive investor experience.

Parent

Build Bond Innovation ETF

BFIX actively manages a broad-based global portfolio of investment grade fixed income securities and US equity call options tied to the upside performance of the S&P 500 Index.

Build Asset Management today launched the BUILD Bond Innovation ETF (NYSE Arca: BFIX), a bond allocation fund designed for a modern global environment defined by low interest rates and constrained economic growth. The fund seeks to outperform traditional bond strategies under the continuation of low yields and/or rising prices in equity markets.

News for Build Bond Innovation ETF ETF (BFIX)