EA Bridgeway Omni Small-Cap Value ETF’s management team is rated Average, but a solid investment process still helps this strategy retain its Morningstar Medalist Rating of Bronze. The portfolio maintains a cost advantage over competitors, priced within the least expensive fee quintile among peers.  

 The strategy's sensible investment philosophy merits an Above Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained a significant 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 People Pillar rating is indirectly assigned by an analyst rather than algorithmically derived. Please see the notes following pillar section for more details. The strategy is part of a first-rate parent that has continuity among portfolio managers and overall attractive fees. These attributes support its Above Average Parent Pillar rating.

Analyst Rating

SkyWest

Golden Ocean Group

Warrior Met Coal

Gulfport Energy Corp

Tronox

MasterBrand Inc

M/I Homes

Crescent Energy

Talos Energy Inc

Delek US Hlds

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. EA Bridgeway Omni Small-Cap Value ETF earns an Above Average Process Pillar rating. 

The main contributor to the rating is the fund's strong long-term risk-adjusted performance. This can be seen in its five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. The firm's five-year retention rate of 100% also underpins the rating. Lastly, the process is limited by its parent firm's inferior risk-adjusted performance, as shown by the firm's average 10-year Morningstar Rating of 2.8 stars. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy tends to hold smaller, more value-oriented companies than its average peer in the Small Value Morningstar Category. Looking at additional factor exposure, this strategy consistently held some companies with relatively lower trading volume compared with Morningstar Category peers in the last few years. Less-liquid stocks might offer strong returns to compensate for their risks, but they can be harder and more expensive to trade in bear markets. In the latest month, the strategy was also less exposed to the Liquidity factor compared with Morningstar Category peers. This strategy has also favored low-quality stocks. This means the fund avoids holding companies that are consistently profitable, growing, and have solid balance sheets. Lacking this ballast, the fund's prospects could rest on its ability to surpass peers during economic booms. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, the managers have consistently taken on more risk, demonstrated by higher volatility exposure than peers. This is a higher-risk, higher-reward approach. In this month, the strategy also had more exposure to the Volatility factor over its peers. More information on a fund and its respective category's factor exposure can be found in the Factor Profile module within the Portfolio section. 

 The portfolio is overweight in financial services and communication services relative to the category average by 7.4 and 3.4 percentage points, respectively. The sectors with low exposure compared to category peers are real estate and technology, underweight the average by 3.7 and 3.3 percentage points of assets, respectively. The portfolio is composed of 599 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 8.3% of the strategy's assets were concentrated in the top 10 fund holdings, as opposed to the category’s 28.1% average. And finally, in terms of portfolio turnover, on a year-over-year basis, 45% of the fund's holdings have changed, whether through increasing, decreasing, or changing a position.

Above Average

Process

EA Bridgeway Omni Small-Cap Value ETF earns an Average People Pillar rating. The team is backed by John N.R. Montgomery, the longest-tenured manager on the strategy, who provides over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 2.8 stars, demonstrating underwhelming risk-adjusted performance. The team boasts an experienced corps of listed portfolio managers, with three others supporting John N.R. Montgomery. Together, they average 24 years of listed portfolio management experience.  The team's personal investments in the fund are insignificant, with the maximum investment by any one manager being between $50,000 and $100,000. That amount is too small to help align managers' interests with the fund's investors.

 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

Overall, Bridgeway benefits from a strong investment culture, earning it an Above Average Parent Pillar rating. The firm has proven successful at holding onto portfolio management talent, providing continuity for strategies, as displayed by lower-than-average turnover in the past five years compared with asset management peers. The firm stands out in its commitment to investor values by offering an open-end and exchange-traded product lineup at a low cost. On average, the firm charges fees on its funds that are within the second cheapest quintile of its category. Bridgeway strategies have failed to have lengthy success. In particular, the firm's 10-year risk-adjusted success ratio demonstrates that only 38% have both survived and beaten their respective category median on a risk-adjusted basis. A low success ratio indicates poor performance and raises questions about a firm’s discipline around investment strategy and product development.

Parent

Ea Bridgeway Omni Small Cap Value ETF

BSVO is an actively managed, broad, and diverse portfolio of US-listed, small-cap stocks that appear fundamentally undervalued and have environmental, social, and governance attributes as perceived by the fund adviser.

Avantis U.S. Small Cap Value ETF

iShares MSCI Germany ETF

VanEck Vectors Gold Miners ETF

VanEck Junior Gold Miners ETF

Franklin Income Focus ETF

Quadratic Interest Rate Volatility and Inflation ETF

iShares Russell 2000 ETF

SPDR S&P Bank ETF

SPDR S&P Regional Banking ETF

O'Shares US Small-Cap Quality Dividend ETF

Invesco S&P SmallCap Value with Momentum ETF

PIMCO 25+ Year Zero Coupon US Treasury Index ETF

Hello! This is markets reporter Isabel Wang bringing you this week's ETF Wrap. In this week's edition, we take a look at small-cap ETFs, which attracted significant inflows in the past week as small-cap stocks have rebounded after being left behind by the megacap technology shares which soared in 2023.

Why it is risky for ETF investors to blindly chase the small-cap rally

JPMorgan Active Small Cap Value ETF

The asset class had been doing well until this week.

Second Active Small Cap Value ETF of 2023 Debuts

News for Ea Bridgeway Omni Small Cap Value ETF ETF (BSVO)