BNY Mellon International Equity ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Silver. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy's sensible investment philosophy merits a High Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an underweight position in liquidity exposure and quality exposure compared with category peers. Low liquidity risk exposure is attributed to stocks with a low trading volume, limiting managers' flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. The strategy’s management team earns an Average People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating. People Pillar and Parent Pillar ratings for this strategy are indirectly assigned by a Morningstar analyst rather than algorithmically derived. Please see the notes following each pillar section for more details. The details of assigning methods can be found in each pillar section.

Analyst 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 index on a risk-adjusted basis over the long term. BNY Mellon International Equity ETF earns a High Process Pillar rating. The largest contributor to 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. The parent firm's five-year risk-adjusted success ratio of 57% also supports the rating. 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. Their commendable success ratio suggests that the firm does well for investors and that this fund may benefit from that. The depth of the portfolio management team supports the process as well. With five portfolio manager at the helm, the fund is well-staffed.

The investment strategy as stated in the fund's prospectus is:  The investment seeks to track the performance of the Solactive GBS Developed Markets ex United States Large & Mid Cap USD Index NTR.  The fund invests all of its assets in equity securities comprising the Solactive GBS Developed Markets ex United States Large & Mid Cap USD Index NTR, depositary receipts based on securities comprising the index, ETFs providing exposure to such securities, and and derivatives with economic characteristics similar to such securities or the index. The index is a free float market capitalization weighted index designed to measure the performance of developed market large- and mid-capitalization companies. It is non-diversified. 

 The portfolio has allocations in its top two sectors, financial services and energy, that are similar to the category. The sectors with low exposure compared to category peers are technology and consumer cyclical, with technology underweighting the average portfolio by 2.7 percentage points of assets and consumer cyclical similar to the average. The strategy owns 1,034 securities and its assets are more dispersed than peers in the category. In particular, 13.4% of the portfolio's assets are concentrated in the top 10 fund holdings, compared to the category average's 15.7%. And in closing, in terms of portfolio turnover, on a year-over-year basis, 13% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

High

Process

BNY Mellon’s  team is comparable to peers, resulting in an Average People Pillar rating. There’s a sizable bench of five managers listed on the fund. Together, they manage a total of 114 strategies, with a Bronze asset-weighted average Morningstar Medalist Rating, demonstrating their potential to deliver positive alpha relative to the category median in aggregate.  

 Note: The People Pillar rating is indirectly assigned by an analyst. The longest-tenured manager of the fund also manages a different product rated by an analyst. Their analyst-assigned People Pillar rating is combined here with the People scores (algorithmic or analyst-assigned) for the fund’s other managers on a tenure-weighted basis.

Average

People

BNY Mellon Investment Management, the asset-management arm of financial conglomerate Bank of New York Mellon, has been busy with changes since CEO Hanneke Smits ascended to her seat in October 2020. The firm’s seven wholly owned but autonomous investment affiliates mostly focus on distinct asset classes. Smits streamlined this arrangement in February 2021 by consolidating most of BNYIM’s active fixed-income and equity capabilities into two affiliates, Insight and Newton, respectively, and by trimming overlapping investment teams; further, the firm sold private-credit-focused Alcentra to Franklin Templeton in May 2022 partially because of that boutique’s operational complexity. Smits believes these organizational changes should help BNYIM’s affiliates manage their strategies more effectively. Yet the firm’s broad strategy lineup remains bloated owing in part to the affiliates’ openness to customized client requests regardless of asset size. 

Smits has sought to improve collaboration across the firm’s investment teams, including by pushing affiliate CEOs to replace “star managers” with comanagers on most strategies. This is a noteworthy effort, but it led to the departure of some managers who didn’t want to partake in the new model. Amid the uncertainty of how these and other changes ultimately shake out, the firm retains its Average Parent rating.

Parent

BNY Mellon International Equity ETF

BKIE tracks a market-cap-weighted index of large-caps in the Developed Markets outside of US.

BKIE tracks a market cap-weighted index of large- and mid-cap companies from developed markets, excluding the US.

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