ClearBridge All Cap Growth ESG ETF earns a Morningstar Medalist Rating of Neutral with strength in areas such as People offset by weaker spots such as Process. The portfolio maintains a cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy gets a Below Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight 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 strategy’s management team earns an Above 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

Amazon

NVIDIA

Microsoft

Broadcom

UnitedHealth Group

Netflix

Vertex Pharmaceuticals

Visa

Apple

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. ClearBridge All Cap Growth ESG ETF earns a Below Average Process Pillar rating. 

The process is bolstered by the experience of the management team, which averages 27 years at this fund. However, the rating is weakened by 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 inferior risk-adjusted performance, as shown by its average 10-year Morningstar Rating of 2.5 stars, also weakens the process. A lower star rating suggests that the firm has struggled to outperform on a risk-adjusted basis.

 This strategy leans toward smaller, more undervalued companies compared with its average peer in the Large Growth Morningstar Category. Examining additional factor exposure, this fund has constantly tilted toward stocks with higher trading volumes than its Morningstar Category Peers over the past few years. More-liquid assets contribute to more-flexible exit strategies without price changes and tend to be a ballast during market selloffs. For example, if the portfolio faces successive redemptions in a short period of time, it will be less likely to experience a significant loss. In recent months, the strategy was more exposed to the Liquidity factor compared with its Morningstar Category peers as well. This strategy has also exhibited a tilt toward high-volatility stocks over these years, meaning it has invested in companies that have a higher historical standard deviation of returns. This orientation tends to pay off most prominently when markets are hot. Compared with category peers, the strategy also had more exposure to the Volatility factor in the most recent month. This strategy also has tilted toward low-quality stocks, companies with higher financial leverage and lower profitability over these years. Such positions do not tend to provide much ballast for a portfolio. 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 healthcare by 5.1 percentage points in terms of assets compared with the category average, and its industrials allocation is similar to the category. The sectors with low exposure compared to category peers are consumer cyclical and financial services, underweight the average by 3.0 and 2.6 percentage points of assets, respectively. The strategy owns 71 securities and is diversified among those holdings. In its most recent portfolio, 41.8% of the portfolio's assets were concentrated in the top 10 fund holdings, as opposed to the category average's 54.8%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 16% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Below Average

Process

ClearBridge All Cap Growth ESG ETF earns an Above Average People Pillar rating. Evan Bauman, the longest-tenured manager on the strategy, provides strong guidance, bringing forward over 25 years of listed portfolio management experience. The average Morningstar Rating of the strategies they currently manage is 3.0 stars, demonstrating average risk-adjusted performance. The team boasts an experienced corps of listed portfolio managers, with three others supporting Evan Bauman. Together, they average over 25 years of listed portfolio management experience. As a team, they manage three investment vehicles together, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating the team will struggle to deliver positive alpha in aggregate. None of the managers here invest any money in the strategy, which is disappointing, as such investments help align managers' interests with fundholders.

 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.

Above Average

People

Franklin Templeton Investments, the asset-management arm of publicly traded but family managed Franklin Resources BEN, has been busy with acquisitions. The struggle in streamlining these disparate capabilities underpins its Average Parent rating. 
Franklin’s July 2020 acquisition of multiboutique manager Legg Mason remains its largest as of March 2023, but the firm has continued to grow through acquisitions. Its April 2022 and November 2022 purchases of Lexington Partners and Alcentra, respectively, make it one of world’s largest managers of alternative investments (with alts comprising USD 231 billion of its USD 1.4 trillion assets under management as of December 2022), while its July 2022 acquisition of O’Shaughnessy Asset Management adds a novel direct-indexing capability to its managed account offerings. These purchases, however, do little to alleviate the operational complexity of a firm with dozens of investment teams split by asset class, region, and investment platform.   
Although there are several standout strategies at the firm, many teams have struggled with personnel turnover, succession challenges, and unappealing performance patterns. Shepherding these geographically disparate capabilities, which have varying levels of centralization of distribution and risk management, shall be quite the challenge for the firm to manage.

Average

Parent

ClearBridge All Cap Growth ETF

CACG is an actively-managed fund of global stocks selected for above average long-term earnings and/or cash flow growth while also including ESG criteria.

CACG is an actively-managed all-cap growth fund with a 0.53% expense ratio. Assets under management are just over $100 million. CACG aims to select a small group of stocks with high growth potential, low valuations, and meet proprietary ESG criteria. However, my analysis reveals the valuation is not met. The ETF has also consistently underperformed the Russell 3000 Growth Index and most other large-cap growth funds since its launch in 2017. Therefore, management hasn't proven the strategy works yet.

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