Weakness in Beacon Tactical Risk ETF's Process and People Pillar ratings limits this strategy to a Morningstar Medalist Rating of Negative. Fees are a weakness here. The strategy's lofty fees are a high hurdle to clear, as it is priced within the most expensive 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 an underweight in momentum exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And low momentum exposure is rooted in holding stocks that are not currently on a winning streak and instead holding those that managers believe are undervalued. The portfolio management team managing the strategy earns a Low People Pillar rating. To be considered a quality steward, this strategy's parent organization needs to improve factors like  personal investments from portfolio managers and a relatively inexperienced portfolio management team. As a result, the firm obtains a Below Average Parent Pillar rating.

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 benchmark on a risk-adjusted basis over the long term. Beacon Tactical Risk ETF earns a Low Process Pillar rating. 

The predominant detractor from the rating is the parent firm's five-year retention rate of 67%, which suggests it could do more to retain its portfolio managers. Management team experience, which averages eight years at this fund, also weakens the process. Lastly, being an actively managed strategy detracts from the process. Historical data, such as Morningstar's Active/Passive Barometer, shows that actively managed funds have generally underperformed their passive counterparts, especially over longer time horizons.

 This strategy skews toward smaller, more value-oriented companies compared with its average peer in the Large Blend Morningstar Category. Examining additional factor exposure, this strategy has held more highly liquid stocks compared to Morningstar Category Peers in the past few years. Such stocks may have less potential upside than illiquid holdings, but they are easier to trade during market downturns. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also taken a contrarian approach with lower exposure to momentum stocks over peers in recent years. Momentum investors tend to expect stocks that have done well recently to continue to do so in the short term. Momentum approaches can entail higher turnover and trading costs since the top stocks can often change. Similarly, in recent months, the strategy also had less exposure to the Momentum factor than peers. In addition, this strategy has not maintained a defensive tilt, demonstrated by low exposure to the quality factor. This means the fund avoids holding firms 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. In recent months, the strategy also had less Quality factor exposure than 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 utilities and real estate relative to the category average by 6.8 and 6.7 percentage points, respectively. The sectors with low exposure compared to category peers are technology and financial services, underweight the average by 17.8 and 4.8 percentage points of assets, respectively. The portfolio is positioned across 12 holdings and is relatively top-heavy. Of the strategy's assets, 90.9% are concentrated within the top 10 holdings, as opposed to the typical peer's 48.8%.

Process

Beacon Tactical Risk ETF earns a Low People Pillar rating. The most important factor behind the rating is the managers' failure to consistently outperform peers at the funds they run, as measured by their combined three-year manager excess returns. 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. The parent firm's five-year retention rate of 67% limits the rating further.

People

Beacon Capital fails to meet industry-standard stewardship qualities, culminating in a Below Average Parent Pillar rating. Portfolio managers at Beacon Capital tend not to invest alongside their shareholders, detracting from the overall stewardship assessment. None of the firm’s assets are covered by an invested manager. With an average tenure of seven years among the longest-tenured managers at Beacon Capital, 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. Beacon Capital stands out in its commitment to investor values by offering its open-end and exchange-traded product lineup at a minimal cost. On average, fund fees at the firm are in the lowest quintile compared with category peers.

Below Average

Parent

Beacon Tactical Risk ETF

BTR is an active fund-of-funds seeking capital appreciation. The fund invests equally across US equity sectors, while attempting to minimize losses in volatile markets. The fund utilizes a stop-loss strategy to tactically shift the portfolio's exposure between equities and fixed income securities.

Beacon Selective Risk ETF

Beacon Capital Management has launched two complementary exchange traded funds on the New York Stock Exchange Arca: the Beacon Tactical Risk (NYSE Arca: BTR) and the Beacon Selective Risk (NYSE Arca: BSR).

Beacon Capital Management Launches Tactical and Selective Risk ETFs

DAYTON, Ohio, April 14, 2023 /PRNewswire/ -- Beacon Capital Management (www.BeaconInvesting.com), a registered investment adviser (RIA) firm that seeks to offer long-term investors innovative portfolio management solutions, announces the launch of its new exchange-traded fund (ETF), Beacon Tactical Risk (BTR), trading on the New York Stock Exchange Arca. With the launch of this ETF, Beacon Capital Management makes its popular investment philosophy accessible to a broad market of investors, working to capture gains while limiting losses in order to deliver consistent returns in today's volatile market conditions. The first day of trading is set for April 18, 2023.

News for Beacon Tactical Risk ETF ETF (BTR)