Global X S&P 500® Catholic Values ETF retains 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 investment process inspires confidence and earns an Above 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 team managing this passive strategy earns a Low People Pillar rating. The strategy's parent organization earns the firm an Average Parent Pillar rating, and this rating is inherited from vehicles belonging to the same branding entity and is indirectly assigned by an analyst.

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. Global X S&P 500® Catholic Values ETF earns an Above Average Process Pillar rating. The most meaningful contributor to the rating is that this fund tracks an index. Historical data, such as Morningstar's Active/Passive Barometer, finds that passively managed funds have generally outperformed their active counterparts, especially over longer time horizons. Excellent risk-adjusted performance also bolsters the process. This can be seen in the fund's five-year alpha calculated relative to the category average, which suggests that the process was successful over that period. 

The investment strategy as stated in the fund's prospectus is:  The investment seeks investment results that correspond generally to the price and yield performance, of the S&P 500®Catholic Values Index.  The fund invests at least 80% of its total assets in the securities of the underlying index. The underlying index is based on the S&P 500® Index, and generally comprises approximately 500 or less U.S. listed common stocks. From this starting universe, and constituents are screened to exclude companies involved in activities which are perceived to be inconsistent with Catholic values as outlined in the Socially Responsible Investment Guidelines of the United States Conference of Catholic Bishops. 

 The portfolio is overweight in technology by 2.8 percentage points in terms of assets compared with the category average, and its communication services allocation is similar to the category. The sectors with low exposure compared to category peers are industrials and financial services; however, the allocations are similar to the category. The strategy owns 437 securities and its assets are more dispersed than peers in the category. In particular, 30.7% of the strategy's assets are concentrated in the top 10 fund holdings, as opposed to the category’s 48.8% average. And in closing, in terms of portfolio turnover, looking at year-over-year movements, 7% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Above Average

Process

Global X’s team earns a Low People Pillar rating. The primary determinant of the rating is the parent firm's five-year success ratio of 30%. The measure indicates the percentage of a firm's funds that survived and outperformed their respective category's median return for the period. The parent's modest success ratio suggests that the firm could do better across its fund lineup. The parent firm's five-year retention rate of 67% also weakens the team. The experience of the management team, which averages four years at this fund, hinders the team as well.

People

Mirae Asset Global Investments is a Korean asset manager and a key player in the Asian financial market. It is a wholly owned subsidiary of Mirae Asset Financial Group, founded by Hyeon Joo Park. Park’s leadership and entrepreneurial spirit have been the driving force behind the global rise of Mirae, and he holds a majority stake in the business. 
Mirae Asset has grown significantly over the years (USD 198 billion as of December 2022) across a diversified platform, of which about 60% of assets are managed in South Korea. We believe that Mirae’s core mutual fund business in the Asia-Pac region is relatively strong. It has a collaborative structure, a strong and large investment team, low manager turnover, competitive fees, and a disciplined approach to product-development pointing toward better stewardship practices relative to peers in these markets. However, this is in stark contrast to its exchange-traded fund business, which accounts for 41% of the total assets. 
The firm’s ETF lineup focuses largely on high-risk thematic strategies that seem gimmicky, emphasizing short-term asset-gathering. The firm appears to leverage trending topics such as robotics and artificial intelligence, virtual reality and gaming, and cloud computing. There’s a notable concern regarding the potential liquidation of these funds since they seem to be designed around investment fads. Furthermore, these products are often expensive, especially compared with broadly diversified index funds and ETFs. Unsurprisingly, Mirae's reflexive product-development strategy has led to an increase in fund closures.
Our experience engaging with the MAGI team to gather critical information for the parent assessment has not been as positive. It hasn’t been as transparent in its disclosures, and unlike its peers, its responsiveness has been inadequate. We prefer firms with a more transparent corporate culture. Overall, these actions hold us back, and the firm retains its Parent Pillar rating of Average.

Average

Parent

Global X S&P 500 Catholic Values ETF

CATH tracks an index of US large-cap stocks selected from the S&P 500. The cap-weighted index omits companies from certain industries at odds with Catholic values.

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