VictoryShares US EQ Inc Enh Vol Wtd ETF's Average People Pillar and Process Pillar ratings result in a Morningstar Medalist Rating of Neutral. The portfolio maintains a sizable cost advantage over competitors, priced within the cheapest fee quintile among peers.  

 The strategy’s management team earns an Average People Pillar rating. The strategy merits an Average Process Pillar rating. Independent of the rating, analysis of the strategy's portfolio shows it has maintained an overweight liquidity exposure and quality exposure compared with category peers. High liquidity exposure is attributed to stocks with a high trading volume, lending managers more flexibility. And a low quality exposure is rooted in stocks with higher financial leverage and lower profitability. 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

Coca-Cola

Kimberly-Clark

Philip Morris

PepsiCo

Kinder Morgan

Williams

Duke Energy

General Mills

Lockheed Martin

Con Ed

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. VictoryShares US EQ Inc Enh Vol Wtd ETF earns an Average Process Pillar rating. 

The main 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. Strong risk-adjusted performance also influences the rating. This can be seen in the fund's five-year alpha calculated relative to the category index, which suggests that the managers have shown skill in their allocation of risk. Lastly, the process is limited by the parent firm's five-year risk-adjusted success ratio of 46%. The measure indicates the percentage of a firm's funds that survived and beat their respective category's median Morningstar Risk-Adjusted Return for the period. The parent's subpar success ratio suggests that the firm could do better across its fund lineup.

 This strategy skews toward smaller, more value-oriented companies compared with its average peer in the Large Value Morningstar Category. Analyzing additional factors, 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. The strategy has also had a defensive tilt, demonstrated by lower exposure to the quality factor than peers in recent years. This means the fund has avoided holding companies that are consistently profitable, growing, and have solid balance sheets. Such positions do not tend to provide much ballast for a portfolio. Similarly, in recent months, the strategy also had less exposure to the Quality factor than peers. Additionally, this strategy has demonstrated a bias away from momentum stocks during these years. Momentum strategies typically bet that stocks that have recently outperformed will continue to do so, and those that have recently underperformed will keep lagging. Avoiding the former and buying the latter could indicate that managers are averse to chasing momentum. In recent months, the strategy also had less Momentum 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 consumer defensive relative to the category average by 18.7 and 6.9 percentage points, respectively. The sectors with low exposure compared to category peers are industrials and technology, underweight the average by 10.4 and 7.0 percentage points of assets, respectively. The portfolio is positioned across 104 holdings and its assets are more dispersed than the typical peer in the category. In the most recent disclosure, 14.5% of the strategy's assets were concentrated in the top 10 fund holdings, compared to the category average's 27.4%. And finally, in terms of portfolio turnover, looking at year-over-year movements, 333% of the fund's holdings have turned over, whether through increasing, decreasing, or changing a position.

Average

Process

Victory Capital’s team is valuable but does not stand out as one of the industry's best, warranting an Average People Pillar rating. The fund takes a solo manager approach, with Mannik Dhillon as the only listed manager at the helm, who brings 10 years of portfolio management experience to the table. They manage a total of 17 strategies, with a Neutral asset-weighted average Morningstar Medalist Rating, indicating they will struggle to deliver positive alpha relative to the category median in aggregate. With only one manager listed on the strategy, the passive strategy is vulnerable to key-person risk. 

 Note: This People Pillar rating is indirectly assigned by an analyst. Morningstar analysts evaluate the People Pillar for passive products at the brand level and may also differentiate by asset class. There is at least one other passive strategy at the firm that is covered by a Morningstar analyst, so the People Pillar rating of the fund is inherited from the rating that the Morningstar analyst assigned to investment vehicles under the same brand name.

People

As Victory Capital Management expands a roster of investment teams that runs the gamut,  it retains an Average Parent rating.

Victory operates a multiaffiliate model. It centralizes operations, compliance, and distribution while giving its 12 franchises investment autonomy. The franchise lineup had long been composed of those primarily focused on small/mid-cap equities. But the 2019 acquisition of fixed-income shop USAA Investments (which was rebranded as Victory Income Investors in April 2023) represented a significant change to that model. The firm has continued to broaden from there, acquiring three new franchises since the start of 2021: THB Asset Management (an environmental, social, and governance specialist), New Energy Capital (an alternatives manager), and WestEnd Advisors (a third-party model strategist). Overall, Victory is as big and diverse as ever: Its assets under management as of March 2023 was $157.6 billion, much higher than the $52.8 billion level as of December 2018.

Victory’s bright spots include Sycamore Capital and Trivalent Investments, which boast strong investment cultures, good levels of manager ownership, and solid capacity management processes. But there are questions elsewhere. Victory Capital Solutions has made some questionable subadvisor changes and dubious exchange-traded fund launches in recent years; Victory Income Investors has seen several departures since the 2019 acquisition and will absorb another franchise, Incore, in September 2023.

Parent

VictoryShares US EQ Income Enhanced Volatility Wtd ETF

CDC tracks an index of 100 high-yield stocks pulled from the largest 500 US stocks, with an earnings screen and volatility weighting.

HCA Healthcare

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Clinical Trial by Harvard Pilgrim Health Care Institute, HCA Healthcare, UCI Health and CDC Identifies Strategy to Rapidly Detect and Respond to Hospital Outbreaks Using Algorithm-Driven Technology

CDC was once a top-performing high-dividend ETF, but in 2023, it ranked dead last in the large-cap value ETF category. Past performance was not a good indicator of future results. While its long/cash strategy succeeded in 2020, the underlying portfolio has gradually lost its low-beta advantage. It's now at the same level as SCHD's, which doesn't have a volatility screen. Due to the ETF's high 0.38% expense ratio, CDC and SCHD also offer nearly identical forward dividend yields, but SCHD is a much higher-quality fund.

CDC: Revisiting This Once Top-Performing High-Dividend ETF

CDC generally invests in U.S. equities with above-average yields and below-average volatility. It sometimes shifts to cash, depending on market conditions. These shifts are sometimes ill-timed, leading to losses and underperformance, as has been the case YTD.

CDC: Ineffective Momentum Strategy, No Reason To Buy

VictoryShares US EQ Income Enhanced Volatility Wtd ETF seeks to track the performance of the Nasdaq Victory US Large Cap High Dividend 100 Long/Cash Volatility Weighted Index. CDC uses a complex investment approach to reduce risk, focusing on dividend-paying stocks and market timing to adjust equity exposure. The Fund has achieved very strong risk-adjusted performance historically.

CDC: A Solid Market Timing ETF

CDC holds 100 stocks selected for their high yield and low volatility characteristics. The ETF was a previous top-performer due to its substantial outperformance during the March 2020 market crash. Unfortunately, CDC lost its way last September, and what followed were disastrous results. Through August, CDC is the worst performer in 2023 among 85 dividend or low-volatility ETFs. Prior research also indicates its unique long/cash strategy only benefits investors approximately 50% of the time. The fully invested CDL has now caught up and surpassed CDC on total returns.

CDC's Catastrophic Collapse: Diving Into 2023's Worst Dividend ETF

VictoryShares US EQ Income Enhanced Volatility Wtd ETF is a defensive fund with inverse volatility weighting and unconventional market timing. The heaviest sectors in the portfolio are utilities and financials. Portfolio quality is inferior to the S&P 500. The CDC ETF has underperformed the S&P 500 and competitors, but has shown lower risk in drawdown and volatility. Market timing rules have often been counter-productive.

CDC: Dividend ETF With Unconventional Market Timing

Schwab US Dividend Equity ETF

The VictoryShares US EQ Income Enhanced Volatility Wtd ETF offers downside protection during market crashes and selloffs for dividend growth investors and income investors. CDC's strategy of automatically shifting to cash during significant market declines can limit downside, but may also lead to underperformance during market rebounds. Investors must weigh the benefits of downside protection against potential underperformance and the impact on long-term income generation and dividend growth.

CDC Vs. SCHD: Comparing Downside Protection To Upside Maximization

CDC follows a long/cash strategy that exits equities in favor of Treasuries as markets decline. The Index currently yields 4.15%, or 3.80% after fees if the fund is fully invested. Selections have four consecutive profitable quarters, but comparisons with alternative high-dividend funds suggest it's an insufficient screen. It's why Regional Banks still make up 7% of the portfolio.

CDC: 4.15% Index Yield, But No Longer Worth Your Money

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This article summarizes the performance of the entire U.S. equity market by examining 1Y, 3Y, 5Y, and 10Y returns for 850+ ETFs across 40 categories. Major indices declined, but investing in Energy, High-Dividend, and Large-Cap Value ETFs softened the blow. Meanwhile, searching for the bottom in mega-cap growth and thematic ETFs didn't work.

U.S. Equity ETFs: The Best And Worst Of 2022

CDC's Index reconstituted about three months ago, resulting in significant changes to the portfolio's fundamentals. Twenty-five companies were added and deleted, mainly because of dividend yield. This article compares the performance of both groups to assess whether these changes were beneficial. I'll also update CDC's fundamentals and compare it to SPHD, another high-dividend and low-volatility ETF.

CDC: Did September's Reconstitution Benefit Shareholders?

CDC is another in a long list of ETFs that are built to reduce risk to the equity markets without sacrificing a bunch of the upside. The ETF has a rule-based algo to reduce risk as the market hits key metrics.

CDC ETF: Large Cap Dividend Exposure With Less Risk? Not So Sure

The Index CDC tracks went through one of its semi-annual reconstitutions earlier this month. Financials increased by 6%, while Utilities and Consumer Staples decreased by 5-6% each. The resulting portfolio is much less defensive, and I don't think investors can enjoy the same downside protection as before, assuming the Index stays 100% long equities.

CDC: 4% Estimated Yield And A Check-Up After September's Reconstitution

A reader asked for my thoughts on CDC. CDC is an equity index ETF investing in high-yield low-volatility U.S. equities, with some market timing included.

CDC: High-Yield Low-Volatility Equity Index ETF, Complicated Strategy, Strong Performance

CDC is now 75% cash, triggered by its Index being off more than 8% from its all-time high price. Fees are 0.36%, AUM is $1.23 billion, and CDC yields 3.05%. Performance since its launch in 2014 is impressive. CDC has the best three- and five-year returns out of all low-volatility ETFs. Most are attributed to the long/cash strategy.

CDC: Testing The Long/Cash Low Volatility Strategy Over 20 Years

Avantis US Large Cap Value ETF

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iShares Core High Dividend ETF

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U.S. equities posted their worst first half performance since 1970, as inflation concerns, Fed rate hikes, and slowing economic growth weighed on markets, according to S&P Dow Jones Indices. Dividend, value, and low volatility strategies outperformed, signaling the market's continuing emphasis on defense.

Here Are the 9 Most Popular Large-Cap Value ETFs

The CDC ETF combines fundamental criteria to select dividend stocks with a volatility weighting methodology. The fund has delivered a positive return thus far in 2022, bucking the trend of the broad market selloff.

CDC: Volatility-Weighted Dividend Strategy Delivering Alpha In 2022

CDC is a high dividend, low volatility fund that strategically exits equities in favor of U.S. treasuries during signs of market weakness. The ETF lost just 1% in March 2020. Unlike other low volatility ETFs, CDC also performs well in rising markets. The ETF has matched the S&P 500 since April 2020, and beat it on risk-adjusted returns, too.

CDC: Three Layers Of Portfolio Protection

CDC, the VictoryShares US EQ Income Enhanced Volatility Wtd ETF, is a volatility-weighted ETF that fell just 1% in March 2020. It accomplished this by correctly anticipating that an 8% drop in February would extend into March, all by following a rules-based methodology.

CDC: Like Medicine For Market Corrections

Victory Capital Management Inc plans to enter the cryptocurrency market with private placement funds and other vehicles for U.S. investors, the firm announced in a press release Wednesday. Victory Capital will be offering investment vehicles that track the Nasdaq Crypto Index (NCI), an index that tracks multiple cryptocurrencies and was co-developed by Nasdaq and Hashdex, [.

Victory Capital to Join Cryptocurrency Market with Private Funds

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Amid very-low interest rate environment, investors may be interested in securities that have the potential to offer capital appreciation as well as benchmark-beating yields.

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VictoryShares US 500 Volatility Wtd ETF

VictoryShares US 500 Enhanced Volatility Wtd ETF

Investors who are concerned about concentration risks associated with the traditional market capitalization-weighted indexing approach may consider alternative index strategies, such as volatility-weighted smart beta exchange traded funds that help limit potential drawdowns.

News for VictoryShares US EQ Income Enhanced Volatility Wtd ETF ETF (CDC)