Despite weakness in the Process Pillar and People Pillar, Inspire 100 ETF has enough other merits to help this strategy earn a Morningstar Medalist Rating of Bronze. The portfolio maintains a sizable cost advantage over competitors, priced within the lowest fee quintile among peers.  

 The strategy receives a Low Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant overweight position 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 Low People Pillar rating. The strategy's parent firm has some investor-friendly attributes, like a competitive lineup success ratio, but it is held back by a pattern of portfolio manager churn. As a result, the firm gets an Average Parent Pillar rating.

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Morningstar's evaluation of this security's process aims to determine the likelihood that it will outperform its Morningstar Category benchmark on a risk-adjusted basis over the long term. Inspire 100 ETF earns a Low Process Pillar rating. The predominant detractor from the rating is the fund's weak long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the process has struggled over that period. The parent firm's five-year retention rate of 64% also holds the rating back. The parent firm's five-year risk-adjusted success ratio of 25% further limits the process. 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 to replicate investment results that generally correspond, before fees and expenses, to the performance of the Inspire 100 Index.  The fund generally invests at least 80% of its total assets in the component securities of the Inspire 100 Index. The index provider selects domestic large capitalization equity securities using the index provider's Inspire Impact Score®, a proprietary selection methodology that is designed to assign a score to a particular security based on the security's alignment with biblical values and the positive impact that company has on its customers, communities, and workplace and the world. 

 The portfolio is overweight in real estate and industrials relative to the category average by 11.1 and 9.7 percentage points, respectively. The sectors with low exposure compared to category peers are consumer cyclical and financial services, underweight the average by 8.5 and 8.0 percentage points of assets, respectively. The strategy owns 102 securities and is diversified among those holdings. In its most recent portfolio, 27.8% of the fund’s assets were concentrated in the top 10 fund holdings, as opposed to the category average's 50.3%. And in closing, 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.

Process

Inspire’s team earns a Low People Pillar rating. The most significant detractor from the rating is the turnover of management across its parent firm. The firm's asset-weighted manager tenure of six years suggests it could do more to retain portfolio managers. Management team experience, which averages five years at this fund, also holds the team back. The combined average five-year excess return of each manager hinders the rating further. It shows that the funds they manage have underperformed their respective category's average return.

People

Inspire is an industry-standard asset manager, leading to an Average Parent Pillar rating. Even with an average pillar rating, Inspire has had impressive longevity among its product shelf. The firm's success ratio is 67%, meaning that 67% of its strategies have both survived and beaten their respective category median. A high success ratio indicates good performance and provides insight into a firm’s discipline around investment strategy and product development. A negative contributor to Inspire's rating is its lower-than-average portfolio management retention over the past five years, as elevated turnover bears watching. With an average tenure of six years among the longest-tenured managers at Inspire, the firm is on par with peers. Seasoned teams tend to have more experience to draw upon should they need to weather turbulent market conditions.

Average

Parent

Inspire 100 ETF

BIBL tracks a market-cap-weighted index of large-cap US stocks, selected based on a proprietary definition of biblical values.

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